Slight contraction in construction activity in May

June 13, 2023

Construction activity contracted again in May, but only slightly, as demand improved.

The latest BNP Paribas Real Estate (BNPRE) Ireland Construction index was still below the crucial 50 mark at 49.4, the eight consecutive month that activity fell.

But there were further signs of recovery, with new orders, employment and buying activity improving on previous months.

“The pattern of recent months continued in May,” said John McCartney, Director and Head of Research at BNPRE.

“Onsite activity levels are broadly unchanged. However, building firms are ramping-up to be busier.”

Purchasing activity and new orders were up for the fourth month in a row, while employment rose for the fifth straight month.

“The future expectations index is now approaching its highest level since early 2022, possibly driven by two factors,” said Mr McCartney.

“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.”

BNPRE said the improvement in the reading was in part a reflection of sustained and stronger uplift in commercial activity.

While the decline in housing activity eased from the previous month, but remained solid overall.

There was also some further easing in supply chain frictions and although average lead times lengthened, they did so at a rate that was 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,” BNPRE said.

While when it came to prices, input costs did rise noticeably, but at the weakest rate in almost three years.

Article Source: Slight contraction in construction activity in May – Will Goodbody – RTE

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