BNP Paribas Real Estate Ireland Construction PMI®: Activity Contracts at Slower Pace & Employment Increases

Key points:

• Softest reduction in housing activity since last September
• Solid increase in employment
• Cost inflation eases to three-month low

The headline seasonally adjusted BNP Paribas Real Estate Ireland Construction Total Activity Index ticked up to 45.9 in January from 45.1 in December. Although signalling a seventh consecutive monthly fall in Irish construction activity, the index pointed to the softest contraction since last October. The slowdown in the overall pace of decline was in large part reflective of a much weaker reduction in housing activity in January. Activity on residential projects decreased slightly, and to the least extent since last September. Commercial activity also fell at a softer pace. Improvements in new business are expected in the months ahead, supporting optimism in the 12-month outlook for construction activity. Sentiment eased, however, and was weaker than the series average. Expected improvements in workloads encouraged construction firms to take on additional staff in January. Employment increased for the second month in a row, and at a solid pace that was the fastest in almost a year.

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Input costs continued to rise sharply in January, but the rate of inflation eased to a three-month low. Panellists reported general inflationary pressures, while there were also some indications of higher shipping costs. Comment Commenting on the latest survey results, John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, said, “Construction activity continued to contract in January, but at a slower pace. This was particularly the case for residential which slowed much less than in December. The relative outperformance of residential reflects the strength of the new homes market where consumers benefit from substantial State subsidies and where average prices are rising by more than 10 per cent per annum. With the temporary waiver of development contributions due to expire in April, it will be interesting to see whether the strong momentum in residential commencements during 2023 will continue over the coming months, leading to resumed expansion in the housing PMI. “The commercial slowdown is as expected, and understandable in the context of oversupply in office markets particularly.” For further details, click here.

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