Construction activity continues to ramp up following loosening of restrictions

Construction activity increased for the second month running following the full reopening of the sector and the Ulster Bank Construction Purchasing Managers’ Index® (PMI®) has recorded one of the strongest rates since the survey began 21 years ago. Index readings above 50 signal an increase in activity on the previous month and readings below 50 signal a decrease – the June reading saw the rating well above the 50.0 no-change mark, posting 65.0 following a reading of 66.4 in May.

A seasonally adjusted index designed to track changes in total construction activity, it showed strong growth in housing, commercial and civil engineering activity.

HOUSING CONTINUES TO LEAD GROWTH

The ramping up of activity across the sector was reflected in strong growth in each of the three categories covered by the survey. Housing continued to lead the expansion, while rates of growth in commercial and civil engineering activity accelerated marginally.

NEW BUSINESS INCREASES SHARPLY

New orders increased substantially again in June, rising for the third month running. Although easing from May’s survey record, the rate of growth was among the strongest in the survey’s history.

FIRMS CONTINUE TO TAKE ON EXTRA STAFF

The ramping up of customer demand and construction activity led to further increases in staffing levels and purchasing activity at the end of the second quarter. Employment rose for the third month running, and at a marked pace. Meanwhile, the rate of expansion in input buying was only marginally softer than May’s record.

When purchasing inputs, construction firms were faced with a combination of severe supply-chain disruption and soaring prices. Suppliers’ delivery times continued to lengthen considerably, with the rate of deterioration much faster than anything seen prior to the Covid-19 pandemic. According to respondents, global issues with raw material supplies and shipping contributed to longer lead times, with Brexit also a factor.

Brexit and global supply issues also resulted in a steep rise in input costs in June. In fact, the rate of inflation accelerated to hit a fresh record high for the second month running as three-quarters of all respondents indicated that their cost burdens had risen over the month. Steel was the item most widely reported to have increased in price.

Companies remained optimistic that activity will continue to rise over the coming year amid expectations that demand will expand as the economy reopens further. Although easing to a four-month low, the level of sentiment remained well above the series average at the end of the second quarter.