Construction grows at the weakest pace over rising building costs
The conflict in Ukraine, higher transport costs and material shortages all added to pressure on supply chains.
The soaring price of building materials has led to a slowdown in construction growth with new orders and employment all rising at slower rates new data shows.
The latest monthly construction industry index, published by BNP Paribas, still indicates growth, albeit at a much slower rate than previously.
The index shows a reading of 53.9 for March, still above the 50.0 no-change mark but well down from the reading of 58.4 seen in February.
The latest figure signalled a solid expansion in total construction activity over the month, but one that was the softest in 2022 so far.
The housing and commercial construction sectors saw the largest rises in activity but both saw a slower expansion when compared with February.
Meanwhile, civil engineering activity dropped for the first time in five months.
The explanation for the softening growth is "straightforward" according to BNP Paribas head of research John McCarthy.
"Arising from supply chain issues and sharp hikes in oil and gas prices, building firms experienced the second-fastest growth in input costs since the index began 22 years ago," he said.
The construction purchasers managers index (PMI) survey was gathered from responses to questionnaires sent to a panel of around 150 construction companies.
A similar picture was evident with regards to new orders, which increased solidly but not at a rate seen in previous months.
With a reading of 54.0 the new orders sub-index continued to show expansion, however, this was the lowest level of order book growth in more than a year.
McCarthy also said the March reading may be "flattered" by advance orders from clients seeking to get ahead of inflation and secure scarce materials with some panellists indicating that concerns about material supply had encouraged customers to make advanced orders.
Construction companies themselves also indicated that they had been looking to stockpile materials in advance of expected price rises and supply problems.
As a result, purchasing activity increased solidly, though again here the rate of expansion eased.
Input costs surged higher in March, with the rate of inflation accelerating to a pace that was only slightly weaker than the survey record posted in October last year.
More than 83% of survey respondents indicated that their input costs had risen over the month. There were widespread reports of higher fuel prices.
The conflict in Ukraine, higher transport costs, and material shortages all added to pressure on supply chains.
The survey found that lead times on the delivery of inputs lengthened substantially, with the rate of deterioration getting worse for the first time in five months.
Building supply firm MyBuildingSupplies.ie which tracks the price of key building materials across the industry said they expect the price of certain products like insulation and MDF to rise further this year, in some cases by as much as 10%.
They said the price of MDF will be affected in particular by the recent conflict due to key ingredients sourced from Ukraine for this.
However, they said there was cautious optimism that prices for products such as cement blocks or timber could be maintained or rise marginally but warned that additional energy and transport costs may cause further increases in prices.
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