New data indicates an accelerated decline in Irish construction activity in July, as demand fell sharply amid strong inflationary pressures. In turn, firms scaled back their purchasing activity and took a cautious approach to hiring, according to the latest BNP Paribas Real Estate Ireland Construction PMI.
It shows companies were pessimistic towards the 12-month outlook for activity for the second month running. The headline seasonally adjusted total activity index fell to 41.8 in July from 46.4 in June, signalling a sharp and accelerated decline in Irish construction activity.
The fall was the fastest since March 2021 when pandemic restrictions impacted the sector. Excluding periods of Covid-19 disruption, the contraction was the most marked for a decade.
Where activity fell, firms linked this to lower demand and rising costs. The pace of reduction in housing activity accelerated sharply over the month, with civil engineering activity also down at a rapid pace. Although commercial activity also fell, the rate of contraction was less pronounced than elsewhere.
“After slowing in June, construction activity experienced a sharper contraction in July,” said John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland. “This reflects several factors. Building costs continued to rise in July, laying down a challenge to the viability of marginally profitable projects.
“The pull-back may also reflect strong activity in the opening half of the year,” he added. Over 130,000 sq m of new office space was added in Dublin during this time, while 13,316 new dwellings were completed –a 49% year-on-year increase.
“In this context, month-on-month expansion naturally becomes harder to sustain,” Mr McCartney said.