Strong increases in housing and commercial activity during August saw Ireland achieve five consecutive years of construction growth, according to new figures.

The latest Ulster Bank Construction Purchasing Managers' Index (PMI) posted 58.3 in August, down from 60.7 in July but still pointing to a sharp monthly rise in construction activity.

The data shows that activity on residential projects increased at the fastest pace of the three categories covered by the survey (housing, commercial and civil engineering). Despite the rate of expansion being substantial, the figures were weaker than seen in July, with the rate of growth in commercial activity also easing and was the slowest in the year-to-date. In addition, civil engineering activity rose for the second month running.

Elsewhere, the rate of expansion in new orders eased for the third month in a row during August, but was still marked. Survey respondents who recorded a rise in new business noted strength in the housing market which lead to this rise. Construction firms also continued to increase staff levelsin August, reflected by rising workloads. Higher new orders fed through to increased input buying in the sector, with purchasing now having risen throughout the past four-and-a-half years. However, this latest increase was the slowest since March.

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Rising demand for inputs put pressure on capacity at suppliers, thereby contributing to a further lengthening of delivery times. The rate of input cost inflation quickened to a three-month high, with the latest rise stronger than the series average. In addition, panellists reported a range of materials as having increased in price.

Looking towards the future, firms stated they were confident that new work on housing projects will help lead to increases in construction activity over the coming year, with optimism rising to its highest level in three months.

Simon Barry, Chief Economist Republic of Ireland at Ulster Bank, said: "For the second consecutive month, all three sub-sectors registered positive growth, with Housing remaining the strongest performing category.

"While the Housing PMI pulled back a bit from what was one of its strongest ever readings last month, this month's reading of 60.3 continues to point to very rapid expansion, and suggests that robust growth in housing output is being sustained though the third quarter following growth of over 30% y/y in housing completions in the first half of the year.

"The August survey results were also notable as they marked the 60th consecutive monthly expansion of construction activity, indicating that survey respondents have now been in recovery mode for five years following the extreme collapse which took hold during the financial crisis.

"While a range of indicators (including employment and homebuilding) indicate that the recovery has further to go to reach more normal levels of activity - and the sector's outlook is not without its challenges (including possible capacity constraints) - firms remain confident about the sector's future prospects.

"In particular, sentiment about the 12-month outlook remained strongly positive in August. Almost 60% of respondents predict a rise in activity, with new work on housing projects cited as a factor expected to continue to support the sector's ongoing expansion."

(LM)