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Construction stabilises after summer slowdown

A regular survey of the health of the construction sector shows that it returned to growth in September for the first time in four months.

BNP Paribas Real Estate Ireland Construction PMI recorded 50.2 – up from 49.6 in August. Any figure above 50 indicates growth.

Although the survey showed signs of stabilisation in new orders, inflation continued to affect firms in the sector.

There were Increases in both commercial (51.1) and housing activity (50.8) in September – in both cases ending a three-month period of contraction. Civil engineering activity (41.5) continued to fall.

Inflationary pressures

Although new orders fell at the end of the third quarter, the rate of reduction slowed sharply from that seen in recent months and, according to BNP Paribas Real Estate, was “indicative of a near-stabilisation”.

Where new business fell, firms again linked the drop to inflationary pressures, with some also highlighting the impact of wider economic weakness.

The survey showed that the rate of cost-inflation accelerated to a three-month high, on the back of higher energy, raw material, and transport costs.

Signs of stabilisation encouraged companies to increase their staffing levels, with employment rising. Staff numbers in the sector have risen in 17 of the past 18 months.

Firms again reported delivery delays, with shortages of couriers and higher fuel costs being the main factors.

Budget impact awaited

John McCartney (director and head of research at BNP Paribas) said that there had been a sharp slowdown in construction activity over the summer months, but that activity now appeared to have stabilised at a lower level.

He added that the survey suggested that the sector was “neither anticipating a construction boom nor a collapse in the months ahead”.

McCartney said that, as work on the survey had largely been completed by 27 September, we would have to wait until next month to see if Budget 2023 measures had had any impact on activity in the sector.