Building slowed at its fastest rate since the summer last month as inflation continued to hit the industry.
The latest construction survey shows that building slowed for the third month running in December, with rising costs hitting demand.
The Construction Purchasing Managers’ Index, seen as a key indicator of industry trends, slid to 43.2 in December, its sharpest fall since July.
Any return below the index’s benchmark of 50 means activity shrank, while any reading above that number indicates that it expanded.
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The index, published on Monday by BNP Paribas Real Estate Ireland, shows construction’s three main divisions, house building, commercial and civil engineering, all slowed sharply in December.
New orders, an indicator of the industry’s prospects, slipped for the ninth consecutive month, according to the survey.
A look ahead to 2023
Builders responded to falling workloads with layoffs. BNP says job losses were “modest” for the month, but were the highest since March 2021.
The inflation that has dogged the industry for almost two years continued in December.
However, the survey states that raw material and other costs rose at a slower rate than in November while price increases were at their lowest in 21 months.
Delays in obtaining supplies lengthened in December, reflecting ongoing bottlenecks and the impact of bad weather.
Builders also cut their use of subcontractors, ending three months of increasing demand for their services.
John McCartney, director and head of research at BNP Paribas Real Estate Ireland, notes that the industry’s slowdown began in June.
He warns that builders do not expect an immediate rebound.
“They initially took a wait-and-see approach to shrinking order books, maintaining staff and continuing to purchase materials,” Mr McCartney says.
“But after nine months of new business contraction, they have now begun running down stocks and not replacing employees who leave.”
State subsidies
Nevertheless, he maintains that builders are positive about the medium term, with most of them expecting to be busier this time next year.
Mr McCartney speculates that slowing inflation could be among the trends influencing this view.
He suggests that a Government scheme to subsidise apartment building in cities, relaxed mortgage lending rules and changes to the shared equity scheme, could be increasing confidence.
Some companies that took part in the survey predicted that development would increase this year.
The index shows that house building fell to 40.6 in December, commercial construction to 46.9 and civil engineering, mostly big State-funded projects, tumbled to 38.9.
