08 Apr 2019

Irish Economy: Construction PMI moderates in March

The latest Ulster Bank Construction PMI release shows that while the sector enjoyed a 67th successive month of expansion, the pace of growth has cooled a little from the white-hot rate implied in February’s report. The headline PMI came in at a still strong 55.9 for last month versus 60.5 in the previous month.



For a seventh successive month growth was concentrated in the Housing (60.8) and Commercial (55.5) segments, while Civil Engineering (43.7) continues to contract at a sharp rate.


The Employment index strengthened to an eight month high of 59.6 in March, which was supported by solid growth in New Orders (albeit at a slightly slower rate than was seen in February). This implied optimism was mirrored by the findings of the Expectations index, which shows that 43% of panellists expect to see growth in output over the coming 12 months. Some panellists expressed nervousness about the potential fall-out from Brexit, but this was a less pronounced phenomenon than had been seen in last week’s Manufacturing and Services PMI reports, presumably due to the more domestic-driven nature of the construction industry.

There was some unhelpful news on the margin front, with input price inflation quickening to a six month high during March, with this caused by greater raw material costs, notably for steel and insulation.

While all three Irish PMIs remained in positive (>50) territory in March, the implied pace of growth in business activity was slightly slower than had been recorded in February, which points to a somewhat softer end to Q119. Given the unhelpful Brexit headlines, this outcome is not a surprise.  

US this week

Global sentiment has been bolstered this week by reports that Washington and Beijing are approaching the end-game in trade talks. Fears of a sharp slowdown in the global economy have also been assuaged by a broad-based pick-up in the Chinese PMIs for March. While the US/China trade dispute looks to be reaching a positive conclusion, investors may begin to fret about the US national security investigation into imported cars. The President currently has until mid-May to decide whether to raise automotive tariffs but the White House’s chief economic advisor has suggested this deadline could be extended.

Markets may also take a steer from the IMF/World Bank spring meeting which is set to get underway on Friday. Proceedings will be kicked off as usual with the IMF’s World Economic Outlook being published. The minutes to March’s FOMC meeting are out on Wednesday, this was the meeting at which the “dot plot” signalled that the Committee no longer considered it appropriate to raise rates in 2019 and announced plans to halt the QE roll-off from its balance sheet. Data releases include the NFIB small business sentiment survey and JOLTS job openings on Tuesday, CPI on Wednesday and the preliminary Michigan consumer survey on Friday.


UK this week

Providing a welcome distraction for UK watchers will be monthly GDP figures on Wednesday, for which we look for a flat sequential growth outturn for February. Further respite will come in the form of the BRC Retail Sales Monitor (Tuesday) and the RICS Residential Market Survey (Thursday). Also, Bank of England Governor Mark Carney will be participating in an IMF panel on Friday. Our usual Brexit update can be perused in our ’Thought of the day’ piece below.


Europe & ROTW this week

In Eurozone markets, the focus next week will be on the ECB meeting on Wednesday. Policymakers have publically discussed the possibility of tiering the ECB’s negative deposit rate to lessen the burden on banks but we expect March’s meeting to be unexciting after the surprise shift in guidance and the unveiling of TLTRO-III in March. On the data front it is set to be relatively quiet, though with French, Italian and EU19 industrial production figures for February due throughout the week. Over in Asia, trade figures from China on Friday – which will be absent of any Lunar new year distortions – will be closely watched for signs of any shift in the downturn in the global trade cycle. Meanwhile, Japanese data includes trade figures on Monday and core machinery orders on Wednesday.


Thought of the Day 


The weekend’s Brexit news flow has actually been relatively light on fundamental game changing news despite the UK’s current 12 April exit date fast approaching. In terms of events in the week ahead, there remains a high degree of uncertainty. Firstly, it remains to be seen how talks between the government and Labour on the way forward progress, with Friday seeing reports from Labour claiming that the government was offering no real changes in negotiations. There is some talk that PM Theresa May could meet Labour leader Jeremy Corbyn later today in an attempt to kick start negotiations and reach some form of agreement which she could take to the EU summit on Wednesday to support her request for another Article 50 extension. But these discussions have yet to be formally agreed. Should an agreement between the two be reached, there is a suggestion that further parliamentary votes would be held tomorrow ahead of the Summit, but again at present there is nothing confirmed.


Secondly, Wednesday will see the EU hold an emergency summit, the purpose of which will be to decide on whether to grant the UK another Article 50 extension. On Friday PM May requested an extension to 30 June, however EU leaders have various opinions on another extension. EU President Donald Tusk has suggested a ‘flexible’ 1-year extension to April 2020, whereby the UK could exit earlier if the Withdrawal Agreement were to be ratified by the British Parliament before then. But there are also those among the EU taking a much harder line such as French President Macron, which suggests the process of agreeing another extension this Wednesday might not be so straight forward.


Economic releases

US        15.00    Factory Orders