Construction activity and new orders fell in June, says PMI

Construction activity and new orders both fell last month amid rising prices and a market slowdown, according to the latest Construction Purchasing Managers Index (PMI). 

Construction activity and new orders both fell last month amid rising prices and a market slowdown, according to the latest Construction Purchasing Managers Index (PMI). 

The AIB Construction PMI showed companies scaling back their purchasing activity but employment continued to rise as business confidence improved slightly. 

Firms continued to face price and supply disruption as a result of the war in the Middle East. The effects of the war in the Middle East continued to be felt with regards to input costs, with higher prices for oil and other raw materials mentioned by firms, the PMI said. Input prices continued to increase sharply in June, despite the rate of inflation easing slightly for the second consecutive month. Sub-contractor rates increased at a much slower pace than seen in May.

"The AIB Irish Construction PMI survey for June indicated that the sector ended the second quarter on a weak footing as sharply rising prices weighed on activity. The headline index fell back into contractionary territory last month, printing at 45.4. This compared to 50.2 in May," said AIB senior economist John Fahey.

"The sectoral breakdown showed that the weakness in June was broad-based with all three sub sectors registering contraction. After four months of expansion, commercial registered a fall in activity in June, albeit it was the least weak of the three sectors. Activity levels in the residential sector contracted for the third consecutive month and by the fastest pace since July 2022. Civil engineering recorded its 14th successive month of contraction."

The new orders index, which is viewed as a leading indicator, fell for the second time in three months, with the pace of decline its steepest since August 2023. The report noted that some respondents attributed this weakness to the backdrop of rising prices acting as a disincentive for potential clients to commit to new projects. 

The PMI said that reduced workloads led construction companies to scale back their purchasing activity for the first time in eight months. "Despite lower demand for inputs, a further lengthening of suppliers' delivery times was signalled amid reports of shipping delays caused by the war in the Middle East and stock shortages at suppliers. That said, the latest deterioration in vendor performance was the least marked in three months."