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Construction activity growth rate slows for second month in a row

The pace of growth in Ireland’s construction activity has slowed for the second month in a row, according to new figures.

The Ulster Bank Construction Purchasing Managers’ Index (PMI) – a seasonally adjusted survey which tracks changes – found the rate of expansion was the weakest since November 2015, down from 62.3 in March to 56.4 last month.

Simon Barry, Ulster Bank’s chief economist for the Republic of Ireland, said: “Irish construction activity continues to grow at a solid, albeit slower, pace.”

The slippage comes after seven-month highs were recorded in February.

According to the study, housing construction continued to increase at the sharpest pace, closely followed by work on commercial projects.

Civil engineering remained the worst-performing category, with only a modest rise in activity at the slowest pace in 2016 so far.

Although the number of new orders was up, linked to the signing of new contracts, the rate of expansion eased.

A slower rise in employment was also registered while the use of sub-contractors dropped for the first time in more than a year.

The sharp rise in purchasing activity at Irish construction firms was attributed to higher numbers of new orders, but the rate of growth was the slowest in the year to date.

Some respondents indicated that a reduced supply of materials had contributed to higher input costs while suppliers’ delivery times lengthened.

There was a more optimistic outlook in terms of business sentiment however, with more than two-thirds of firms predicting a rise in activity over the coming year.

Forecasts of improving economic conditions and higher new business supported positive sentiment, while some firms suggested that an expectation of improved housing supply would help lead to growth of activity.

Mr Barry added: “The headline PMI index declined markedly for the second month in a row to leave it at 56.4 in April – its lowest level since last November. It was a similar story in the details beneath the headline figure, with slower rises in activity also recorded in each of the major sub-sectors of housing, commercial and civil engineering.

“However, these declines need to be seen in the context of the exceptional strength recorded earlier in the year which saw the main PMI as well as the housing sub-index establish new record highs in February.

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“So while this slippage in momentum bears careful monitoring in the months ahead, it is important to note that these results are still very much consistent with a sector comfortably in expansion territory. Indeed, construction firms remain distinctly upbeat about the sector’s prospects.

“Sentiment in April rose to its second-highest level in the survey’s history as more than two-thirds of respondents anticipate further gains in activity in the coming 12 months.”

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