Construction activity contracts again but at a slower pace

BNP Paribas Index posted below the 50.0 no-change mark for the third month running in September and for the eighth time this year

Builders reported that the cost of steel, sanitary ware, insulation, and construction wages all fell in September.

Construction activity contracted again last month but at a smaller pace than in previous months.

The latest BNP Paribas Real Estate Ireland Construction Activity Index published on Monday posted below the 50.0 no-change mark for the third month running in September and for the eighth time this year. 

However, standing at 48.6, up from 44.9 in August, the index pointed to only a modest, and much softer, drop in activity. 

The survey of 150 construction companies found that where activity decreased, respondents often mentioned a market slowdown.

However some panellists reported signs of improving demand, and this was reflected in new orders, which showed a move towards stabilisation in September following marked reductions in July and August.

Cost inflation slowing

Cost inflation for construction inputs has been on a slowing trend since October 2021.

This trend was bucked in July and August, with input price inflation rising in both months. 

However, the long-term trend resumed in September with a pronounced slowdown in input cost inflation relative to August amid reports of reduced pressure from material prices. 

Some companies also noted reduced wage costs.

"September was a broadly positive month for the construction sector," John McCartney, head of research at BNP Paribas, said.

"Activity edged lower, but the slowdown was marginal and considerably less than in July and August which were particularly weak months."

"Panellists reported that the cost of steel, sanitary ware, insulation, and construction wages all fell in September."