- New orders, employment and purchasing increase at quicker rates
- Decline in activity only fractional
- Rate of input price inflation eases to 33-month low
An improvement in demand conditions not only supported a softening in the Irish construction sector downturn in May but also contributed to some strengthening in trends seen elsewhere across the latest survey. Uplifts in new orders, employment and buying activity were sustained with rates of increase accelerating in all three cases. Pressures on supply and prices also eased somewhat. The extent to which lead times lengthened was the least pronounced since November 2017 and the rate of input price inflation dipped to a 33-month low.
The headline seasonally adjusted BNP Paribas Real Estate Ireland Construction Total Activity Index posted only fractionally below the crucial 50.0 mark which separates growth from contraction in May. At 49.4, up from 48.4, the latest reading was indicative of an eighth consecutive fall in total activity levels, but a reduction that was only slight overall. The improved headline reading was, in part, a reflection of the sustained and stronger uplift in commercial activity. Meanwhile, the decline in housing activity eased from April but remained solid overall.
While some firms mentioned that lower activity levels reflected slowing market conditions, others reportedly benefited from a pick-up in market demand. Indeed, the same factor reportedly supported a fourth consecutive uplift in new orders during May. The rate of increase was slightly stronger than in April but still only marginal overall.
To reflect the sustained expansion in new orders, Irish construction firms noted a further uplift in their staffing numbers midway through the second quarter of the year. Purchasing activity similarly increased for the fourth month in a row. In both cases, rates of increase strengthened on the month to reach modest paces.
Our ‘Marketing to Ireland’s Construction Market’ section includes details of principal contractors, housebuilders, architects and other specifiers. The feature also provides details of
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Meanwhile, May data was indicative of some further easing in supply chain frictions in the Irish construction sector. Average lead times lengthened, but at a rate the least pronounced since November 2017. Anecdotal evidence suggested that while there was some improvement in the operation of supply chains, vendors faced labour shortage issues.
On the price front, input costs increased markedly but at the weakest rate since August 2020. Inflation of the rates charged by sub-contractors similarly softened, easing to a 26-month low. Nevertheless, their quality was deemed to have deteriorated and at the sharpest pace since March 2022. Greater sub-contractor usage occurred despite the most pronounced reduction in their availability in almost a year.
Looking to the year ahead, Irish constructors were positive in their outlook for activity over the coming 12 months. In fact, firms registered the second-strongest degree of confidence since February 2022. Opportunities for growth included hopes for a sustained pick-up in market demand, a boost in development activity, higher volumes of renewable energy projects and a payoff from new business strategies.
Commenting on the latest survey results, John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, said, “The pattern of recent months continued in May. Onsite activity levels are broadly unchanged. However building firms are ramping-up to be busier, with new orders and input purchases increasing for the fourth month in-a-row, and employment rising for the fifth successive month. The future expectations index is now approaching its highest level since early 2022, possibly driven by two factors. As confirmed by recent Census statistics, Ireland’s population continues to rise strongly, generating a natural demand for homes and logistics buildings which serve the supply-chain needs of a growing population. Secondly, while still rising, input costs are doing so at their slowest rate since August 2020. The combination of these dynamics is giving rise to greater optimism about construction viability.”
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