Commercial sector boosts construction activity in January – PMI

Activity in the construction sector grew in January for the second month in a row, but the pace of growth slowed from December, a new survey shows. 

The latest Ulster Bank Construction Purchasing Managers Index showed a reading of 50.9 in January, above the 50 no-change mark again but down from 52 in December. 

Ulster Bank said today’s data suggested that the overall rise in activity was centred on a strong performance in the commercial category. 

It noted that activity on commercial projects increased markedly, and at the fastest pace since February 2019. 

But housing activity saw a modest reduction, while civil engineering activity decreased at the slowest pace in eight months.

Simon Barry, Ulster Bank’s chief economist, said companies reported particular strength in commercial activity where a third successive monthly increase saw its index pick up to an 11-month high. 

“This leaves growth in commercial projects running at a very solid pace above the long-run average for the survey which spans the past 20 years,” the economist said. 

But he said the January results on residential activity were on the “disappointing side”. 

“Following a bounce in December, the Housing PMI dipped back below 50 last month as respondents reported an early-year contraction in residential activity,” he said. 

“However, with leading indicators such as the housing commencements data continuing to point to further upside for housing output, we would be surprised if the Housing PMI doesn’t show some improvement in the months ahead,” Simon Barry said. 

Ulster Bank said a second consecutive strong improvement in the new orders index took the growth rate of new business to a seven-month high in January as reduced Brexit-related uncertainty was again cited as a support for the near-term outlook. 

There was also a further strengthening of optimism about the year ahead where sentiment rose to its highest level in 12 months. 

“Over 43% of respondents expect their activity to rise in 2020,  with firms citing strong pipelines of new work as a key support for the outlook for the coming year,” Ulster Bank said.

The increased new order volumes also led construction companies to expand their staffing levels again in January. This extended the current sequence of job creation to just under six and a half years. 

Ulster Bank also noted that the latest rise in employment was solid and the sharpest for seven months.

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