Construction sector continues recovery as activity rises, but housing output remains slow

Total activity moved above the neutral 50 threshold for the first time since September 2022, rising to 50.4 in June from 49.4 in May.

Housing output remained sluggish in June while the overall construction sector recorded an increase in activity for the first time in nine months, according to a leading monthly survey.

The latest survey by BNP Paribas Real Estate Ireland indicated that viability issues, particularly for apartments, are holding back Ireland’s residential market amid a housing crisis.

“Residential activity edged lower for the ninth successive month, but the rate of contraction continues to diminish,” said John McCartney, director and head of research at BNP Paribas Real Estate Ireland.

He said the sector is expected to deliver 30,000 completions this year in the residential market.

However, the results of this Purchasing Managers Index showed that the sector is recovering after it was hit with several economic challenges over the last three years, including covid work stoppages and inflation. 

New orders and employment continued to expand last month while inflationary pressures cooled, with the weakest rise in input costs since August 2020.

“This has been coming for a while, with building firms consistently reporting increased new orders and staffing levels since the start of this year,” said Mr McCartney.

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In addition, firms marginally reduced their input purchases for the first time since January, with some quoting sufficient stock holdings and concerns around the potential for a market slowdown. Declining demand for inputs served to lower cost pressures during June.

Total activity moved above the neutral 50 threshold for the first time since September 2022, rising to 50.4 in June from 49.4 in May. Commercial activity drove the overall uplift.

Anything below 50 is considered a contraction in activity. Housing output picked up slightly from 45.4 in May to 48.4 in June.

The survey suggested Irish building companies remain broadly optimistic and foresee increased activity levels over the coming year, but the confidence index remained below its long-term average. 

The confidence index was at its joint-weakest in the year so far, with firms still concerned about the inflationary environment.