Construction Orders Down, BNP PRE Says, But Confidence Highest Since Early 2022
An improvement in demand conditions not only slowed the downturn in the Irish construction sector in May but also pointed to a bullish outlook, according to the latest BNP Paribas Real Estate Ireland Construction PMI.
Despite economic challenges and high inflation, construction confidence is approaching its highest level in more than a year, the index shows.
The headline seasonally adjusted BNP Paribas Real Estate Ireland Construction Total Activity Index in May posted only fractionally below the crucial 50 mark, which separates growth from contraction. At 49.4, up from 48.4, the latest reading showed an eighth consecutive fall in total activity levels, but a reduction that was only slight overall.
However, future expectations in the sector are approaching their highest level since early 2022, driven by strong demographic trends and moderating costs.
Uplifts in new orders, employment and buying activity were sustained, with rates of increase accelerating in all three cases.
Pressures on supply and prices also eased somewhat. The extent to which lead times lengthened was the least pronounced since November 2017, and the rate of input price inflation dipped to a 33-month low.
The improved headline reading was, in part, a reflection of the sustained and stronger uplift in commercial activity. Meanwhile, the decline in housing activity eased from April but remained solid overall.
While some firms mentioned that lower activity levels reflected slowing market conditions, others reportedly benefited from a pickup in market demand.
To reflect the sustained expansion in new orders, Irish construction firms also reported a further rise in their staffing numbers midway through the second quarter. Purchasing activity similarly increased for the fourth month in a row.
Average lead times lengthened, but at a rate the least pronounced since November 2017, while input costs increased markedly but at the weakest rate since August 2020.
Irish constructors were positive in their outlook for activity over the coming 12 months, registering the second-strongest degree of confidence since February 2022.
Opportunities for growth included hopes for a sustained pickup in market demand, a boost in development activity, higher volumes of renewable energy projects and a payoff from new business strategies, the adviser said.
“The pattern of recent months continued in May,” BNPRE Head of Research John McCartney said in a statement. “Onsite activity levels are broadly unchanged, however building firms are ramping up to be busier, with new orders and input purchases increasing for the fourth month in a row, and employment rising for the fifth successive month.
“The future expectations index is now approaching its highest level since early 2022, possibly driven by two factors. 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.”
