Construction activity continues to decline as costs increase

The seasonally adjusted total activity index stood at 46.9 in August up from 41.8 the previous month. However, a score of under 50 represents a contraction in activity.

Irish construction activity continued to decline in August as new orders fell significantly while the rate of input cost inflation "remained pronounced", the latest report showed.

The BNP Paribas Real Estate Ireland Construction PMI showed that construction activity had fallen for a third successive month, demonstrating the impact of recent price rises. 

John McCartney, director and head of research at BNP Paribas Real Estate Ireland, said the recent pricing signals from sales and "the rental market indicate continued undersupply".

Continued economic uncertainty and input price hikes resulted in a sustained negative business sentiment during August. However, the degree of pessimism was considered "modest" for the third month running.

The seasonally adjusted total activity index stood at 46.9 in August, up from 41.8 the previous month. However, a score of under 50 represents a contraction in activity.

A combination of significantly higher input costs and a low level of demand has resulted in constructors lowering their purchasing activity for the third month in a row. Despite sentiment remaining muted companies increased their staffing levels.

“Activity picked up strongly last summer as Covid restrictions were lifted and stalled projects got the green light to resume. However, surging construction inflation and increased macro-uncertainty have since begun to pull in the other direction," said Mr McCartney.

He continued adding that construction order books are down for the fifth month in a row and there has been a sharp decline in material purchases leaving industry expectations tilted towards a contraction.

Mr McCartney said that 28,000 new homes can be completed this year, however, he warned that due to the rapid re-acceleration of population growth "the positive trend in housing output needs to continue".