Sunday, December 14, 2014

14/12/2014: Irish Building & Construction Q3 2014: Another Quarter of Unconvincing Recovery

Indices for activity (volume and value) in Building & Construction sector in Ireland were published this week covering Q3 2014. Here are the details:

Across all Building & Construction sector:

  • Value index for all Building & Construction sector rose to 108.6 in Q3 2014 - the highest reading since Q4 2009 and the second reading over 100.0 since Q4 2010. Year-on-year, index is up solid 11.38%, slightly slower than Q2 rise of 11.55%. The index, however, is still 70.88% below the peak.
  • Excluding Civil Engineering, Building & Construction activity rose in value 103.4 in Q3 2014, he highest reading since Q4 2013 and up 9.77% y/y. This is the slowest rise in the index in 6 quarters. In Q2 2014, index rose 11.82% and in Q1 it was up 14.91%.
  • In volume terms, all Building & Construction activity index reached 108.1 in Q3 2014, up 9.97% y/y, slightly below 10.37% growth in Q2 2014. Volume of activity in the sector is still 72.40% below the pre-crisis peak.
  • Again, taking out Civil Engineering, the activity in the sector is growing at a slower pace in volume terms - up 8.43% y/y in Q3 2014 and down 80.03% on peak.
Chart to illustrate:

In basic terms, overall activity in the broad sector is running along a nearly flat trendline with some signs of very fragile recovery. And that is off the levels so abysmally low that one would require sustained 20%+ growth rates to achieve any meaningful gains.

Underlying the above trends, we have at least some life showing in the Residential Building segment. In Q3 2014, Residential Building activity index posted a 21.13% y/y rise in terms of value, reversing two consecutive quarters of decline. Still, value of activity in this sub-sector remains 90.5% lower than at the pre-crisis peak. In volume terms, the index rose 19.55% and is down 91% on pre-crisis peak. 

Two chart below show just how pathetic the recovery has been to-date in Residential Building & Construction sub-sector.

In summary, there is barely any life in the Building & Construction sector activity - measured against both volume and value of activity - across all sub-sectors, save Civil Engineering, where the falloff has been relatively shallower (down 26% on peak in Q3 2014 in terms of value and 28.5% in terms of volume). And, of course, the data is again contrary to the booming Construction Sector PMIs. What a surprise!

Interestingly, in non-Residential Building sector, activity is growing at the rates of just 2.33% y/y in terms of volume and 3.75% y/y in terms of value - despite the numerous 'good news' claims from Nama and the commercial real estate sector and despite the allegedly 'low' vacancy rates and rising rent rolls.

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