10 Dec 2018

Rate of Growth in Construction Activity Quickened in November

Rate of growth in construction activity quickened in November notwithstanding a very sharp contraction in the Civil Engineering segment.

Irish Economy: Construction growth quickens in November


The latest Ulster Bank Construction PMI report shows that the rate of growth in activity quickened in November, notwithstanding a very sharp contraction in the Civil Engineering segment. The headline PMI improved to 55.5 last month from October’s 52.9 reading. While this is commensurate with a sharp uptick in activity, it is still the second weakest monthly reading this year. Growth is concentrated in the Housing (58.2) and Commercial (57.5) segments. Civil Engineering (40.1) saw its sharpest contraction since January 2014 (the month following Ireland’s exit from a three year EU-IMF programme). 


There was a welcome strengthening of New Orders to a five month high of 59.1, which supported a 63rd successive monthly increase in employment. However, in tandem with last week’s Manufacturing and Services PMI, confidence about the outlook has cooled (the Sentiment index fell to its lowest since August 2013), which likely reflects unhelpful headlines regarding the Brexit process. With that being said, nearly 45% of firms expect activity to increase over the coming year, while a 57th successive monthly increase in purchasing activity also points to optimism. On the margin side, Input Price inflation has eased to a two year low, notwithstanding metal price increases and reduced availability of construction materials.


May under pressure


Pressure has further intensified UK PM, Theresa May, over the weekend to delay the meaningful vote, which is still currently scheduled for Tuesday. At the same time PM May and the Tory whips have continued to press Conservative MPs in an attempt to galvanise support for the current Brexit deal, but there looks to be little change in sentiment among MPs, with continued reports that the PM faces the prospect of 100 plus Tory MPs voting against the deal, a result which May’s advisors fear could lead to a leadership challenge in May or a no confidence motion in the government. The PM however hopes that some MPs will fold at the very last minute. There was also a further resignation over the weekend with Will Quince, PPS to Gavin Williamson quitting, whilst the Telegraph has reported that a Cabinet Minister is considering their position, but there was no word on who. There is also some talk that PM May could possibly engage with the EU in an attempt to find some last minute fixes, but again there is nothing concrete on this front. 


Up in the air


The situation is very fluid and things could all change within the next 24 hours. One factor that could determine whether the vote happens tomorrow is an amendment put forward by Hilary Benn; this would effectively reject May’s Brexit deal and rejects ‘no deal’ and gives more power to Parliament. We await a decision from the House of Commons Speaker John Bercow on whether this has been chosen by the as one of the amendments to be debated, but if it is, it would give May a get out clause to avoid holding the vote Tuesday. Finally we would note that there is continued talk and possibly rising MP support for a second referendum, although the government’s position is still that a second vote will not take place. N.B: The European Court of Justice ruled, just this morning, that Britain is now free to cancel its notification to leave the EU without other EU member states consent can only offer the ‘Remainers’ some glimmer of hope.


US jobs data (Nov)


November’s figures were softer than expected with non-farm payrolls rising by 155k in Friday’s reading (consensus +198k, Investec +220k). The main unemployment rate (U-3) held steady at 3.7%, as widely expected.  Average hourly earnings rose by 0.2% on the month (consensus +0.3%), but the year-on-year rate was steady as expected at 3.1%. Average weekly hours, the manufacturing workweek, overtime hours and the participation rate were all flat on the month. However the principal wider measure of unemployment (U-6, sometimes referred to as the measure of underemployment) rose to 7.6% from 7.4% (the highest rate since June), implying that there may be more slack in the labour market than previously believed. 


Economic Releases


09.30 UK GDP
09.30 UK Industrial Production
12.30 US ECB’s Angeloni speaks