Construction sector continues to see strong growth despite challenges
Construction firms continued to experience strong growth in November, the latest Ulster Bank Construction Purchasing Managers Index survey shows.
The Ulster Bank Construction PMI posted a reading of 56.3 in November, down marginally from 56.9 in October but still showing a sharp monthly increase in total activity.
November also marked the seventh month of growth in a row with the latest improvement coming on the back of growing demand.
For the first time in four months, all three monitored areas of construction saw increases in activity as civil engineering returned to growth.
Ulster Bank noted that civil engineering posted the fastest expansion of the three categories while the rates of growth in housing and commercial activity remained marked.
Construction firms responded to higher workloads by expanding their staffing levels for the eighth month in a row.
But there was little respite for companies trying to buy inputs in terms of supply-chain disruption in November. Delivery times continued to grow substantially amid pressure on capacity and delays caused by Covid-19 and Brexit.
Costs also continued to rise at a “considerable” pace in November due to higher material costs, rising freight charges and Brexit, Ulster Bank noted.
Companies also said the carbon tax had contributed to higher input costs with almost 68% of companies saying their input costs had risen over the last month.
However Ulster Bank also said that companies remained optimistic that activity will continue to rise over the coming year.
Commenting on today’s index, Ulster Bank’s chief economist Simon Barry said it remains at elevated levels consistent with a strong pace of activity expansion, albeit one which has decelerated from the exceptional, post-lockdown snap-back growth registered earlier in the year.
“The overall sector’s ongoing recovery momentum was again evident in very healthy readings in Employment and New Orders, both of which recorded accelerating growth in November which resulted in a three-month high in each case,” Mr Barry said.
He noted that growth in new business was partly linked to opportunities across the housing, healthcare and renewable energy areas.
“However, the November results again make clear that the sector continues to face highly testing supply-chain challenges linked to a variety of factors which continue to result in delivery delays and marked input cost pressures, including the pandemic, Brexit, higher global and domestic prices for energy and other materials and rising freight charges,” the economist said.
“And yet there was just a hint that the intensity of supply-chain disruptions may be easing a little as input price inflation and the pace of lengthening of supplier lead times eased to the weakest in six and seven months respectively,” he added.