The headline BNP Paribas Real Estate Ireland Construction Activity Index posted below the 50.0 no-change mark for the third month running in September, and for the eighth time this year. That said, at 48.6, up from 44.9 in August, the index pointed to only a modest, and much softer, fall in activity. The decline was the softest in the current sequence of decreasing activity.
Where activity decreased, survey 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.
Input cost inflation 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.
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Companies generally expect improving demand over the coming year to lead to higher construction activity and the proportion of firms expecting to be busier in 12 months’ time rose from 31.2% in August to 37.4% in September.
Employment in the sector has been rising fairly consistently since April 2021 and this continued in September with employment rising for the ninth successive month. Although modest this rise was broadly similar to that seen in August.
Commenting on the latest survey results, John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, said, “September was a broadly positive month for the construction sector. Activity edged lower, but the slowdown was marginal, and considerably less than in July and August which were particularly weak months.
“Input cost inflation slowed again, after sharpening against the run of play in July and August. Panellists reported that the cost of steel, sanitary ware, insulation and construction wages all fell in September. The latter tallies with CSO data which show reduced average earnings in construction and, in tandem with the sustained pick-up in employment, suggests that there is no immediate shortage of building workers.
“The return to softening cost inflation, at a time when new homes price inflation is running at 11%, is positive news for viability. Perhaps reflecting this, the Future Expectations Index shows that construction firms remain quite optimistic, with 81 percent expecting to be as busy or busier in one year’s time.”
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