Construction activity contracts for a sixth month

January 16, 2024

There was a contraction in construction activity for the sixth month running in December, the latest Purchasing Managers’ Index for the sector from BNP Paribas Real Estate Ireland shows.

However, there was a slightly softer pace of decline in the final month of the year with the headline figure increasing from 45.1 to 44.5.

Any score under 50 denotes contraction in sectoral activity.

“That said, the rate of contraction in total construction activity remained marked and extended the current sequence of reduction to six months,” the report noted.

Of the three areas of construction covered by the report, the sharpest reduction was seen in commercial activity where the rate of contraction was sharp and faster than that seen in November.

Housing activity also fell, but to a lesser extent than in the previous survey period.

John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, said the standout figure from the report was the continued decline in commercial activity.

“Leaving aside Covid lockdowns and the decline seen last August, the latest reading was the weakest in over a decade,” he noted.

“Commercial values have inevitably been impacted by higher interest rates, and this has been compounded by soft occupational demand in some sectors, particularly offices.”

Employment returned to growth in December, having fallen for the first time in 11 months in November.

Business sentiment rose to a seven-month high, the report showed, amid optimism about future orders.

Higher charges by suppliers resulted in a further sharp increase in input costs in December.

However, the rate of inflation eased from that seen in November and was softer than the average for 2023 as a whole.

“The net effect has been squeezed development margins, stemming the flow of new project starts,” John McCartney noted.

“However, commencements are up by almost 18% between January and November, suggesting a positive outlook for the sector,” he added.

Article Source – Construction activity contracts for a sixth month – PMI – RTE

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