Construction activity increased again in July

According to Ulster Bank’s latest Construction Purchasing Manager’s Index (PMI), construction activity saw a substantial increase again in July.

While the index that tracks changes in total construction activity rose from 65 in June to 62.8 in July, it still suggests a substantial increase in activity last month.

Index readings above 50 signal an increase in activity from the previous month, while readings below 50 signal a decrease.

Growth in real estate activity continued to dominate the overall expansion in July, despite the rate of increase slowing from May’s record.

Expansion rates also moderated in the commercial and civil engineering categories, but remained strong nonetheless.

The PMI shows that easing restrictions and increasing demand have supported continued growth in new orders.

“Confidence in construction companies picked up from June and remains well above its long-term average,” said Simon Barry, chief economist at Ulster Bank, Republic of Ireland.

The rate of growth, however, brings its own challenges. The inflation rate for input costs hit a record high in July.

Mr Barry said there had been considerable disruption in supply chains linked to Brexit and the pandemic which manifested in delivery delays, material shortages and further acceleration.

He said it was not only a phenomenon in the Irish construction sector, but that it was known globally, with similar PMIs in the UK recording higher rates of cost inflation inputs.

New business grew at a considerable pace and faster than that of June.

Construction companies increased their workforce for the fourth month in a row, according to the PMI, with job creation rates remaining high.

Respondents indicated that improved customer demand was the driving force behind the increase in employment.

It also led to a further expansion in purchasing activity – the fourth in as many months.

Serious supply chain disruptions remained a feature of the construction industry as the second half of the year began.

The survey shows that supplier delivery times have lengthened more than in June, and again at an almost record rate.

According to those interviewed, the delivery delays are due to Brexit and equipment shortages.

This continued disruption in the supply of materials has caused their prices to continue to rise.

The PMI shows that the rate of inflation of input costs hit a new survey record for the third consecutive month, with more than three-quarters of all respondents indicating that their input prices increased in July.

“55% of companies expect activity to increase over the next twelve months,” said Barry, “as the pick-up in demand due to the reopening of the economy should continue to support the outlook activity during the coming year “

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