New home building activity fell again in March for the sixth month in succession, figures published on Monday show
Monday’s construction purchasing managers’ index (PMI), published by bank BNP Paribas Real Estate Ireland, registered overall activity in the industry at 49.5 in March. Any result below the index benchmark of 50 indicates a decline in business activity, while any reading above that figure indicates growth.
March’s reading was the fourth monthly decline in a row, and the dip was more pronounced than the fall to 49.8 recorded in February.
Within the overall index, a lack of activity in building new homes dragged the index down, with a reading of 46.5. That is the sixth month in a row that new home building has seen a decline in activity in what will be seen as a blow to Government efforts to get to grips with the Republic’s 10-year-old housing crisis.
According to most estimates, the Republic needs at least 35,000 new homes a year to cater for its population’s needs. Official figures calculate that the total hit 29,851 last year, but some have questioned this, saying it was closer to 23,000.
In what could also worry the Government, activity in the civil engineering sector, which is mostly State-funded infrastructure projects, fell even more sharply than housing, hitting 46.1 in March.
Only commercial building – offices, factories, warehouses and other business premises – bucked the trend, rising to 51.9 in March, indicating that it is the one sector of the construction industry seeing increased activity.
However, the index is showing signs of a turnaround for builders. Companies interviewed for the survey said new orders had risen for the third month in a row. They said they had responded by hiring new workers and stepping up the purchase of building materials, BNP said.
Inflation, which has hindered the industry for more than two years, continues to be a concern but the rate of price increases slowed in March.
Similarly, builders continued to deal with supply squeezes that have been a problem since Covid curbs rowed back two years ago, though BNP notes that this also improved last month.
John McCartney, the bank’s director and head of research, highlighted three trends from the first three months of the year.
“Firstly, overall construction activity contracted, but marginally, and at a diminishing rate through the quarter,” he said.
“Secondly, input cost inflation slowed markedly. Thirdly, every forward-looking indicator on the PMI dashboard switched from negative to unambiguously positive.”
Mr McCartney noted that order books had strengthened progressively over the opening three months of 2023. Increased hiring and materials purchases mirrored this.
“Meanwhile, the proportion of Irish building firms expecting to be as busy or busier in 12 months time has steadily risen from 82 per cent last December to 87 per cent in March,” he said.
Builders hope to cash in on planned development work and upcoming renewable energy projects over the coming year, the survey found.
However, confidence faltered slightly from February and stayed below its longer-term average. Some builders noted that the market had remained subdued in March, but others agreed that there was some relative improvement in demand, the survey shows.
BNP Paribas Real Estate Ireland compiles the index from questions sent to 150 building companies during the month.
