Construction activity saw modest slowdown in September – PMI

October 10, 2023

Activity in the construction sector slowed again in September, according to the latest purchasing managers index from BNP Paribas Real Estate Ireland.

The index stood at 48.6 in the month – below the 50 marker that separates growth from contraction.

It makes September the eighth month of the year so far to see a decline in activity – with only June registering modest growth.

However the rate of contraction was far slower than in previous months, and compares to a 44.9 reading in August.

That came as some of the survey’s panellists reported signs of improving demand.

“Over the course of the year we’ve had successive month-on-month slowdowns but they have been quite marginal,” said John McCartney, head of research at BNP Paribas Real Estate Ireland.

“Most of it is probably coming from the commercial side, where we have enough office blocks at this stage, nobody is really building new shopping centres anymore,” he said.

“So I think that’s where the drag is coming from – housing is still going pretty well and I think the expectations are for housing output to probably reach about 31,000 or 32,000 units this year,” he added.

There was also reason for optimism around input prices, which continued to rise in the month but at a slower pace than before.

Firms reported a fall in the price of steel, insulation, sanitary ware and wages during the month.

“The trend has been for slowing construction inflation and that goes right back to October 2021,” Mr McCartney said.

“It’s been a long-term trend, but we did have a bit of a blip in July and August and that gave rise to concerns that maybe the uptick in oil prices that we’ve seen could turn the trend in the opposite direction,” he said.

“I think that’s still a concern because the conflict in Israel is obviously going to have an effect on oil prices – it already is in fact – and many construction materials such as steel, concrete, cement, they are correlated with oil and gas prices,” he added.

Overall, firms remained optimistic about the coming months.

The proportion of firms expecting to be busier in 12 months’ time rose from 31.2% to 37.4% in this survey.

More than 43% of firms said they expected to be as busy in a year’s time.

That’s despite continued inflationary and interest rate pressures, and jitters around the health of the national and global economies.

“I think the Government has played an important role in this, when you look at the schemes like Help to Buy, the Shared Equity scheme, and other supports like the Local Authority Home Loan, the relaxation of mortgage lending rules,” Mr McCartney said. “All of those provide confidence for builders that, if they build properties, they will be able to sell them at a price-point that makes it viable for them.”

Article Source: Construction activity saw modest slowdown in September – PMI – Adam Maguire – RTE

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