New construction orders rise for first time in 3 months

Updated / Monday, 9 Nov 2020 17:26

Housing activity increased for the first time in three months in October, the latest Ulster Bank Construction PMI shows

The construction industry continued its recovery in October despite ongoing reports of disruption caused by the Covid-19 pandemic. 

The Ulster Bank Construction Purchasing Managers' Index posted a reading of 48.6 in October, up from 47 in September and rising for the second month in a row as activity neared stabilisation.

Readings above 50 signal an increase in activity on the previous month and readings below 50 signal a decrease.

A seasonally adjusted index, the PMI tracks changes in total construction activity and covers housing, civil engineering and commercial construction activity.

Today's index reveals that housing activity increased for the first time in three months, but more decreases were seen in activity on commercial and civil engineering projects. 

It also showed that staffing levels saw an expansion for the first time in eight months. Ulster Bank said that as well as increasing new orders, efforts to catch up on previously delayed projects also supported employment growth.

Meanwhile, purchasing activity also saw its first increase since July and Ulster Bank said the rate of expansion was the fastest since May 2019. 

Simon Barry, Ulster Bank's chief economist, said the October results contained reports of improving demand among some firms. 

But he added that such reports were not widespread enough to avoid another sub-50 reading for the headline PMI which continues to indicate that more firms are reporting declining rather than increasing activity levels. 

"The latest results also again highlight that Covid-19 continues to disrupt construction supply chains, with supplier delivery times lengthening further last month amid reports of shortages of, and higher prices for, raw materials," he stated. 

According to Mr Barry,  the October results did provide some slightly more encouraging signals, including the headline PMI rising for the second consecutive month in October.

He also said that forward-looking elements of the results are pointing to possible improvement ahead, adding that firms posted an increase in new business for the first time in three months, with a modest improvement in orders reflecting a pick-up in client demand. 

"In turn, more new business as well as efforts to catch-up on work delayed by the pandemic underpinned a further improvement in the employment index," he said. 

"Business confidence moved back into positive territory last month helped by reports of a healthy pipeline of work, albeit that uncertainty and concerns around the ongoing impacts of the pandemic continue to weigh on sentiment about the sector's prospects," the economist added.

Meanwhile, the Construction Industry Federation said its adherence to health guidelines and the CIF's Standard Operating Procedure were "heavily monitored" by the HSA, HSE, other state agencies and CIF members - and stressed that no prohibition notices had been issued against non-compliant building firms.

It said that since the sector had reopened in May, there had been fewer than 40 cases of Covid-19 across Ireland's 1100 substantial construction sites employing 147,000 employees - meaning that in 99.99% of situations, Covid-19 had been kept off sites. 

"The HSA carries out significant levels of inspections and works with companies suggesting improvements based on their expert knowledge and on their assessment that there is no immediate threat to employees," the CIF said in a statement. 

"Where there is actual non-compliance, the HSA can initiate a prohibition notice. To our knowledge, prohibition notices have not been made and the HSA's suggested improvements have been adopted further bolstering the industry's safety."  

The CIF stressed that over 220,000 people had undergone the CIF's Covid-19 induction programme, while the Standard Operating Procedure had been downloaded over 20,000 times.