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Building activity flat as housing stagnates

A survey of the construction industry indicates that activity in the sector was stable in August, helped by a modest recovery in the commercial-property sector.

The BNP Paribas Real Estate Ireland Construction Purchasing Managers' Index (PMI) recorded 50 – up marginally from 49.9 in July. This figure indicates no change in the level of activity from the previous month.

BNP Paribas said that housing activity (49.8) stagnated after fifth months of growth, but commercial activity (51.1) grew for the first time in three months.

Civil-engineering activity (44.1) dropped again, continuing a two-and-a-half-year sequence of decline.

A breakdown of the survey showed that, while new orders continued to grow, employment levels fell for the first time in nine months and cost inflation continued to rise sharply.

Business confidence high

Business confidence, however, reached a six-month high, with companies encouraged by the volume of enquiries coming in, with particular optimism about the housing sector.

Commenting on the fall in employment, John McCartney (director and head of research at BNP Paribas Real Estate Ireland) said that, paradoxically, there did not appear to be a lack of demand for builders, pointing to strong wage growth in the sector.

“Likewise, today’s PMI indicates that order books are expanding, and the vast majority of building firms expect to be at least as busy this time next year.

“Therefore, taking everything in the round, the data suggest that the sector may now be encountering labour constraints,” he concluded.