Construction rebounds in May

The construction sector activities rebounded strongly in May after contracting in April on the availability of new projects, particularly in road development in a sign that the critical government funded infrastructure projects are gradually getting off the ground with the budget allocating the highest for any year for public investments.

The construction sector Purchasing Managers’ Index (PMI) for May reported an index value of 59.7, indicating expansion, turning from 41.4 index points in April.

The construction sector activities showed a contraction in April as the sites were closed for the traditional New Year holidays which were a bit longer this time than usual.

Under PMI, an activity is split between an expansion and a contraction at an index value of 50.0 while an index value of 50.0 suggests a neutral level.

The May expansion in the construction activities is a reflection that the expansion in one of the most crucial sectors in the economy remains intact despite the seasonal fluctuations.  

However, the PMI data also suggested that the sector needs the continuous availability of the large infrastructure projects to sustain its growth momentum as sector participants who have contributed to the PMI survey in the past have repeatedly cited these projects as a crucial element.

The continuous availability of multilateral funding, the resumption of bilateral funding after the successful conclusion of debt restructuring and the largest budgetary allocation on public investments by the government for 2025 could catalyse the sector growth to new highs since previous highs seen in the post-war years.

The substantially low borrowing costs in the economy would also act as notable propellers for the sector, specially in areas of commercial real estate and housing.

While in May sub-indices such as new orders and quantity of purchases increased due to the availability of new projects, particularly in road development, the employment sub-index contracted, albeit at a slower pace than in April.