Construction Sector Continues To Expand But At Slowest Pace In Eight Months

A new survey shows that activity in the construction sector continued to expand last month – but at its slowest pace in eight months.

Ulster Bank’s PMI dropped to 53.7 in December from 56.3 in November. Readings above 50 signal an increase in activity on the previous month and readings below 50 signal a decrease.

Activity growth was broad-based in December, with all three monitored categories posting expansions.

The fastest rise was in commercial activity where the rate of expansion was marked, albeit the softest in eight months. “Solid” rises were also seen in housing and civil engineering, Ulster Bank said.

Optimism in the outlook and increases in workloads meant that constructors continued to expand their staffing levels at a marked pace.

Ulster Bank noted that employment has now risen for nine months in a row, but in line with the trends in activity and new orders, the rate of job creation eased in December.

The rate of input cost inflation remained elevated and was among the sharpest on record despite easing markedly from that seen in November.

Higher costs for fuel, materials and transportation were reported, with firms also linking inflationary pressures to Brexit.

Ulster Bank’s chief economist Simon Barry said the December survey results offered some encouraging signs regarding the sector’s prospects as we move through the early part of 2022.

“First, the input cost index fell for the second consecutive month, with a marked drop last month taking it to an eight month low.

“While still at a very elevated level consistent with ongoing rapid increases in input costs, the readings at the end of last year do suggest that the intensity of cost pressures and related supply chain challenges is now easing somewhat.” Simon Barry said.

“Second, construction firms continue to benefit from sharp ongoing increases (albeit at a slightly slower pace) in new orders amid reports of improving demand. And third, firms themselves remain confident about the coming year,” he said.

“Underpinned by strong pipelines of new work, expectations of further improvement in demand and confidence in housing market prospects, sentiment regarding the year-ahead outlook edged higher in December leaving it again well above the long-term average. Over 46% of firms expect their activity to rise in the coming 12 months – the highest reading since August,” the economist added.

© Civil & Construction 2023