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Construction activity growth slows

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There was a slight drop-off in building activity in June, the monthly Ulster Bank construction purchasing managers’ index shows, as expansion of activity eased from “extremely elevated” levels the previous month. The construction PMI, which is designed to track changes in total construction activity, showed a reading of 58.4 in June, dipping from May’s reading of 61.8. Any number over 50 signals growth in the sector. But despite the June dip, the sector has seen growth for the past 58 months with rising workloads encouraging companies to increase their hiring.

Ulster Bank said the survey continues to show that housing and commercial remain areas of particular strength within the sector, despite some cooling of growth momentum in June from the exceptionally rapid rates recorded in May. But other elements of the survey also painted a very positive picture, with the pace of job creation quickening further while new business also rose at a very rapid rate, barely slower than last month’s one-year high. Ulster Bank’s chief economist Simon Barry said that confidence among firms about their prospects for the year ahead remains very elevated, with 56% of respondents expecting activity to rise. He noted that the favourable outlook for construction was also a prominent theme in figures from the CSO last week. These showed that the rate of new business formation in construction more than doubled from 2010 to 2016, with over 4,600 construction start-ups accounting for almost a quarter of all start-ups across the Irish business sector in 2016.

“Moreover, the start-up rate in construction is now the highest of the business economy’s three main sectors, having – unsurprisingly – been the lowest during the crisis,” Mr Barry said.  “We estimate a 9.1% start-up rate in construction in 2016, significantly ahead of the equivalent rates in industry (7.7%) and in the broad services sector (7.3%) – a clear indication of expectations for recent construction sector outperformance to continue,” he added.