Construction activity in Ireland experienced an unexpected slowdown in July, according to the BNP Paribas Real Estate Ireland Construction Index. The index, which measures activity month-by-month, recorded a reading of 45.6, indicating a contraction in activity compared to the previous month. This slowdown was evident across all sectors of the industry, with housing, commercial, and civil engineering all showing a decline in activity.
Despite the overall slowdown, the survey did reveal some positive signs for the industry. Employment levels in the construction sector increased in July compared to the previous month, suggesting that builders may be preparing for better times ahead. This increase in employment reflects the continued confidence in the sector, as construction firms have been able to recruit staff despite the tight labor market.
One of the notable findings from the survey was the rise in building cost inflation. After cooling significantly in June, building cost inflation picked up again in July. Almost a quarter of the managers surveyed reported an increase in input costs during the month. This increase in inflation costs could have contributed to the overall slowdown in construction activity.
Commenting on the findings, John McCartney, Director and Head of Research at BNP Paribas, described the July PMI as a “mixed bag.” He noted the contrasting findings, such as the slowdown in housing activity despite recent official figures showing a pick-up in housing starts. McCartney also highlighted the positive indicators, such as the increase in employment and the slight increase in sector optimism between June and July.
The future expectations indicator remained positive, indicating that there is still confidence in the construction sector going forward. This confidence, coupled with the continued increase in housing starts, suggests that the industry may experience better times ahead. However, the unexpected contraction in activity in July raises some concerns about the overall stability of the sector.
Overall, the BNP Paribas Real Estate Ireland Construction Index paints a mixed picture of the Irish construction industry. While there are positive indicators, such as the increase in employment and sector optimism, the unexpected slowdown in July raises questions about the sustainability of the industry’s growth. It will be important to monitor future data to determine whether this slowdown is a temporary blip or a more significant trend.