There were further signs of a slowdown in growth of Irish construction output during August, but activity continued to rise sharply during the month amid sustained growth of new business, according to Ulster Bank’s Construction Purchasing Managers’ Index for the month.

It found that with new work rising again, companies continued to take on extra staff at a rapid pace. However, the rate of cost inflation remained sharp amid euro weakness.

The Ulster Bank Construction PMI, which tracks changes in total construction activity, posted 56.5 in August, down from 59.1 in July but still signalling a sharp monthly rise in activity. Total output has increased continuously throughout the past two years.

Commenting on the survey, Simon Barry, chief economist for Ireland at Ulster Bank, noted that the headline PMI fell for the second month in a row in August, but the declines were from what was the second-highest reading in the survey’s history in June.

“At 56.5, the overall PMI remains considerably above the threshold level of 50 which signals expansion. Similarly, solid, but somewhat slower, rates of expansion were also recorded in residential and commercial activity, though a second consecutive decline in civil engineering activity highlights that this sub-sector remains a relatively weak spot,” he added.

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“Other notable highlights from the August survey included encouraging strength in new orders, where a further sizeable increase in new business levels augurs well for the sector’s near-term prospects.”

Commercial Resurgence

The commercial sector remained the best-performing of the three monitored categories by Ulster Bank in August, posting a substantial monthly increase, albeit the weakest since March.

Growth of residential activity also eased for the second month, running to the slowest in five months.

Civil engineering activity decreased for the second successive month. Although modest, the rate of contraction was slightly sharper than that seen in July.

New Businesses

Growth of total activity was supported by a further expansion in new business. Ulster Bank said that there was little sign of a slowdown in growth of new work, as the rate of expansion was broadly in line with the previous month. New orders have now increased in each of the past 26 months.

The rate of job creation was also little-changed from the previous month in August, remaining strong as around 24% of respondents took on extra staff.

Irish construction firms continued to increase their usage of sub-contractors, albeit at a reduced pace.

The availability of sub-contractors deteriorated sharply again, with the rate of decline only marginally weaker than in July. This contributed to a further substantial increase in rates charged by sub-contractors, in spite of a further deterioration in their quality.

A combination of new order growth and efforts to replenish stocks led to another rise in purchasing activity during August. The rate of expansion eased for the third month running, but was still sharp.

August data signalled a further sharp increase in input prices, which Ulster Bank said was mainly attributed to the weakness of the euro against sterling having led to rises in the cost of imported items.

The rate of inflation was broadly in line with that seen in July. Business sentiment remained strongly positive amid predictions of ongoing new order growth. Around 58% of panellists expected activity to increase over the coming 12 months.