Irish construction just about returns to growth as input costs increase 

Housing and commercial activity increased in September while civil engineering contracted

Activity in housing and commercial, which includes offices, retail, and industrial sites, posted positive readings in the survey. Picture: PA

Irish construction just about returned to growth last month after a poor run over the summer months, as the industry scrambled to get to grips with sharply rising input costs, a major survey has shown. 

The monthly survey of purchasing managers by BNP Paribas Real Estate Ireland showed that two of the three parts of the industry — housing and commercial activity — increased activity, while the third leg of the industry, civil engineering, contracted. 

"The increase in activity was the first in four months, but only fractional," the survey found. There were "signs of stabilisation in new orders supported the return to growth, but there were ongoing reports of difficulties caused by rising prices and fragile demand", it found. 

Activity in housing and commercial, which includes offices, retail, and industrial sites, posted readings slightly above the 50 level in the survey, that is the difference between growth and contraction, as input cost inflation edged higher.

BNP Paribas Real Estate in Ireland director and head of research, John McCartney said that Irish purchasing managers don't anticipate "a construction boom nor a collapse in the months ahead". 

Citing improved expectations for next year, Mr McCartney said that building firms had held onto staff over the summer, and that the survey had been completed before the budget announcement. 

Business start-ups down

Separately, business information firm CrifVision said the number of company start-ups in the third quarter had fallen by 6% from a year earlier.

The figures are closely watched for early signs of corporate distress. Manufacturing, computer firms, and construction posted notable declines, according to the survey. CrifVision managing director Christine Cullen said:

Global uncertainty contributing to inflation, soaring energy prices and borrowing costs are feeding woes in the domestic marketplace.

The number of new start-ups in Cork, at 1,136 in the quarter, was 18% lower thn a year earlier. 

Meanwhile, broker Davy has said the "rude health" of the public finances gives the Government room to add to the €4bn it has already earmarked to subsidise household and company utility bills this winter, if it so requires.                

In new forecasts, the broker cut its forecasts for GDP here, but still sees the Irish economy avoiding contraction next year, despite the cost-of-living crisis that will likely push Britain and the eurozone economy into recession. 

However, housing completions will fall back to 27,000 units in 2023 from 28,400 this year, it said. 

GDP will grow by 3.5% in 2023 as the fallout from the Ukraine war weighs on Irish consumer spending growth. Irish inflation will peak at 10% in October, the broker forecasts. 

"However, as in the Covid-19 pandemic we expect Ireland’s defensive export sector should still see robust growth, exports up 7%, keeping Irish GDP growth in positive territory, well ahead of the consensus forecasts" for the eurozone of 0.2% and the contraction of 0.3% for Britian, Davy said. 

The GDP forecasts compare with the 4.7% expansion seen by the Government in its budget delivered last month, and the 5.3% and 4.4% growth rates projected in respective reports by the Central Bank and the Economic and Social Research Institute last week.     

"A key point is that Ireland’s public finances are in rude health due to surging corporate tax revenues," the broker said.

"We expect a surplus of €4bn of GDP in 2022, growing to €9bn in 2023, absent further policy measures. So the Irish Government may well end-up adding further temporary support for Irish households and firms, following the €4bn temporary measures announced for the winter in Budget 2023," it said.