Construction PMI records a good start to Q2

13 May 2019

Irish Economy: Ulster Bank Construction PMI records a good start to Q2

The latest Ulster Bank Construction PMI for Ireland suggests an uptick in the rate of growth in activity in April, with the headline PMI firming to 56.6 from the previous month’s 55.9 reading. The sequence of above-50 readings now stretches to 68 months.

Analysis: As has been the case for some time, growth is concentrated in the Housing (60.5) and Commercial (54.6) segments, with Civil Engineering (46.4) recording an eighth successive decline.


The report shows a “reacceleration in New Orders growth”, although a minority of panellists warned of negative Brexit uncertainty effects weighing on demand. There is some distortion within the release on areas such as purchasing, reflecting contingency planning around the UK’s original (end-March) scheduled departure date from the EU. Encouragingly, however, while employment growth eased during April, the rate at which firms are adding to headcounts was sharp and quicker than the long-run series average. Sentiment also picked up from March’s 68 month low, with over 40% of panellists expecting activity to increase over the coming year.


Action: This release is a welcome contrast to the Manufacturing and Services PMIs for last month, which indicated a slowing in the rate of growth in activity in those sectors. Nonetheless, the stamp of ‘Brexit uncertainty’ on a number of sub-indices shows that developments in Westminster continue to weigh on the short-term economic outlook here.


IRES / HBRN / CRN / GLV: report showcases ongoing residential imbalances

News: The latest report into the Irish rental market from the country’s largest property website,, serves as a further reminder of the large mismatch between supply and demand in the residential market.


Analysis: The data accompanying the report show that national rents have recorded a 27th successive quarterly increase, while for the 13th time in those 27 quarters, rents rose in each of the 54 sub-markets defined by


The national annual rate of inflation was 8.3% in Q119, a five year low (reflecting the impact of the rent caps) but nonetheless a pace of increase that points to severe imbalances (the overall CPI is currently showing annual growth of a far more pedestrian 1.7%). Rents across Dublin were 6.8% higher y/y in Q1. reports that only 2,700 properties were available to rent across Ireland (housing stock: just over 2m units) on May 1st, the lowest figure ever recorded on the platform (the series dates back to the start of 2006). Of these, 1,200 units were available to rent in Dublin.


Action: The report’s author, Trinity College Professor Ronan Lyons, says that to close the gap between supply and demand in the capital “Dublin needs to build tens of thousands more rental homes”. For reference, in 2018 the construction industry delivered 18,072 new homes across the whole country, of which only 6,924 were completed across Dublin’s local authorities. All of IRES and HBRN’s residential holdings are located in Dublin, while the housebuilders are chiefly focused on the capital and its commuter belt.


Brexit developments

There is relatively little to report at the start of the week. Talks between the Conservatives and Labour on a cross-party deal continue today, but there seems to be very little progress and there is pressure on both sides from their respective parties to withdraw. The way forward for the government then would be to aim to allow another set of indicative votes in the hope that an acceptable option could gain a majority in the Commons.


Meanwhile opinion polls over the weekend point towards the Conservatives heading for a dire outturn in the elections to the European Parliament on the 23rd May. A YouGov poll in the Times this morning puts the Tories in fifth place with 10%. The Brexit Party leads with 34% with Labour in second place on 16%. Theresa May is due to visit the executive committee of the 1922 Committee of backbench Tory MPs on Thursday when she will remain under pressure to outline the timetable for her departure as Prime Minister.


US this week

After the US increased tariffs to 25% (from 10%) on $200bn worth of Chinese goods from 00:01 on Friday, specific news on next steps in the dispute over the weekend has been quieter. However on Friday President Trump did order the US trade representative (USTR) to start the process of raising tariffs on all remaining imports from China; the value of products subject to the new round of tariffs is approximately $300bn. The process for a public notice and comment period for the tariffs will be published shortly and more details will be available on the USTR's website today. 


From China’s side, we have not yet had news of any specific retaliatory tariffs, but these are still expected to follow shortly. By way of efforts to try and settle and resolve the latest dispute, it is being reported that Beijing has invited US trade negotiators for talks, though with no US response reported yet. In the absence of any scheduled meeting, Larry Kudlow, President Trump's economic adviser, said yesterday that there is a "strong possibility" Mr Trump will meet Chinese President Xi Jinping at the G20 economic summit in Japan, scheduled for 28-29 June.


After a torrid week for risk sentiment last week, the Shanghai composite is -1.1% lower this morning, with the S&P future more than 1% lower. US data releases are largely concentrated on Wednesday when retail sales, industrial production and the NAHB house prices will all be released. Rounding off the week is the NFIB small business survey on Tuesday, housing starts on Thursday and the Michigan consumer sentiment survey on Friday.


UK this week

In Westminster, negotiations between the government and Labour have continued unsuccessfully. There had been hopes that headway would be made last week after Labour leader Jeremy Corbyn said that there was a "huge impetus" on MPs to reach a deal in the wake of disappointing local election results for the two parties. Talks have yet to yield any material progress, leading the government to conclude that it will not be able to reach a deal in time to avert holding European Parliament elections on 23 May.


For UK data-watchers, the only notable release this week is set to be the labour market release on Tuesday. We expect this to show that conditions remained tight in the three months to March, with our forecast for a steady unemployment rate of 3.9% and average weekly earnings growth of 3.5% (3m yoy). Also note that external MPC member Jonathan Haskel is set to speak on Thursday, while a scheduled review of the UK’s sovereign debt rating by Moody’s will cap off the week on Friday.


Europe & ROTW this week

In Europe, the week will start with Eurozone industrial production figures and Germany’s ZEW survey on Tuesday before then giving way to the first estimate of German Q1 GDP on Wednesday. Further noteworthy releases include the second estimates for Euro area Q1 GDP (Wednesday) and final HICP figures for April (Friday). Over in Asia, the usual flurry of monthly Chinese activity data will be released on Wednesday which will include industrial production and retail sales figures for the month of April. Also released will be Japanese trade figures on Tuesday and house price data for China on Thursday.


Economic Releases

14.10 US FOMC Member Clarida Speaks
14.10 US FOMC Member Rosengren Speaks
18.20 US FOMC Member Kaplan Speaks