House construction

Homebuilding growth cools as supply disruptions begin to be felt

Growth in housing construction activity slowed further last month, despite continued overall growth in the construction sector.

Ulster Bank’s monthly construction index reached 56.9 points in October, from 56.3 in September.

While the increase in activity in October was the smallest since April, the reading is still well above the 50 neutral points that separate one growing industry from one in decline.

Growth was driven by a sharp and accelerated increase in tertiary building projects; with the decline in civil engineering works and the continued slowdown in the growth rate of the housing activity.

Business confidence among construction companies has improved on the back of the further increase in construction activity and new orders from companies last month.

New business flows have now increased in each of the past seven months as the release of pent-up demand continues.

Construction companies said they stepped up their staff hiring rates last month in response to the increase in overall activity levels.

Confidence levels are strong, with some companies expecting further release of pent-up demand in the coming year.

“Commercial activity was particularly strong in October as the pace of growth accelerated markedly, while residential activity recorded a solid expansion last month, albeit at a slower pace compared to September.” said Simon Barry, chief economist at Ulster Bank in Ireland.

However, Barry said supply chain disruptions remain a very problematic headwind for construction companies.

“Respondents cited Brexit, the Covid disruption and shortages of delivery drivers and materials as factors that have contributed to record lengthening of delivery times and record growth in input costs,” t -he declares.

“Nonetheless, despite such headwinds, companies remain confident about the 12-month outlook,” he said.

“Sentiment rose from September and was again above long-term average levels, reflecting expectations that the ongoing release of pent-up demand will continue to support business growth through the year to come, ”Mr. Barry said.