Construction Activity Up As Cost Pressures Dip Near 3-Year Low

The Irish construction sector saw its first increase in construction activity since September 2022, with sustained and quicker growth in new orders and employment in June.

Input cost pressures retreated to a 35-month low as resilient demand helped the Irish construction sector out of its recent soft patch, according to the BNP Paribas Real Estate Ireland Total Activity Index.

New orders and employment continued to expand in June at their fastest rate since March. Meanwhile, inflationary pressures in the sector continued to cool.  

The index has moved above the neutral 50 rating for the first time since September 2022, rising to 50.4 in June from 49.4 in May. Although only a slight increase in activity, it is the most pronounced in over a year.

Panel members attributed this to more favourable demand, underscored by the fifth monthly expansion in new orders. As a result, Irish construction companies expanded their workforce for the sixth month in a row.

The rate of employment growth was the most pronounced since March, albeit only at modest levels overall. 

Commercial activity drove the overall uplift, as housing activity edged lower, though at its slowest pace since October 2022. In addition, firms marginally reduced their input purchases for the first time since January, which lowered cost pressures during June. 

Irish building companies remain broadly optimistic and foresee increased activity levels over the coming year, according to the report, which said that growth prospects centre on “general hopes for a boost in demand.”

“This has been coming for a while, with building firms consistently reporting increased new orders and staffing levels since the start of this year,” BNP Paribas Real Estate Ireland Director and Head of Research John McCartney said in a statement.  

“The pick-up reflects two factors. Firstly, cost pressures have retreated to their lowest level for 35 months. Secondly, population growth, the strong economy, Government support and increased demand for green buildings continue to underpin the value of newly constructed properties, particularly new homes and warehouses.”  

McCartney said that residential activity was marginally lower for the ninth successive month but pointed out that the rate of contraction continued to diminish.

“Viability remains challenging, particularly for apartments,” he said. “However, new homes inflation of 11.1% per annum — compared with 3.5% for second-hand dwellings — is helping to offset the impact of rising costs, and we expect 30,000 completions this year.”