Construction activity drops again as building material costs rise

The latest construction index shows a reduction across residential, commercial and civil sectors. File picture: Larry Cummins

Construction activity across Ireland fell again in November as new orders continued to drop.

The latest construction index shows a reduction across residential, commercial and civil sectors. The pace of input cost inflation also quickened to an eight-month high.

The seasonally adjusted AIB Ireland Construction Total Activity Index moved further below the 50.0 no-change mark in November, dropping to 46.7 after being at 48.1 in October. Activity has now decreased in each of the past seven months, with the penultimate month of the year seeing a solid reduction.

Anecdotal evidence pointed to slowing demand and a drop in new orders which meant volumes of new projects were insufficient to fully replace completed contracts. However, the survey respondents remained positive for the future reporting increases in employment and purchasing activity.

The commercial construction sector recorded a renewed and solid decline in activity. Work on housing projects fell for the seventh consecutive month, but at the slowest pace since June. Civil engineering posted the sharpest decline as the rate of contraction accelerated from October.

John Fahey, AIB senior economist, said the PMI points to a renewed loss of momentum in building activity. “The index has now been below the key breakeven level of 50 for seven consecutive months,” he said.

Concerningly, construction firms experienced a build-up of inflationary pressures. The pace of increase in input costs quickened for the second month running to the fastest since March. 

The responses from a panel of 150 Irish construction firms reported that their suppliers had upped their charges during the month.

Where companies purchased items, they were faced with a further lengthening of suppliers' delivery times, continuing the trend seen over the past 18 months. A number of firms reported that they were waiting for stock to become available at suppliers.

Despite falling building activity, the sector saw an expansion in employment, following declines in the previous two months. Construction firms also retained a positive outlook on the prospect of increased activity levels over the coming 12 months, albeit the degree of optimism did ease marginally compared to October.