Construction companies registered strong employment growth during February even as the sector continued to contract, albeit at a slower rate, according to a report by BNP Paribas Real Estate Ireland.
The construction purchasing managers’ index (PMI) report showed the sector enjoyed a broad stabilisation in activity levels and fresh growth in new orders. Firms registered the first uptick in input buying since May last year.
There was some less positive news on the pricing front, however, as input costs and subcontractor rates increased at faster paces than in January.
Overall, the construction sector PMI came in at 49.8 in the month, just below the 50 mark that separates growth and contraction. The figure was up from 47.7 in January, but the reading was indicative of a fifth successive reduction in total activity.
John McCartney, head of research at BNP Paribas Real Estate Ireland, said the “green shoots” strengthened further in February.
“The pace of contraction continued to slow leaving construction effectively unchanged in the month,” he said. “More importantly, the forward-looking data are pointing in a distinctly positive direction.
“New order books are expanding and, through their words and actions, building firms appear to be confident that this will be sustained. The proportion of construction companies saying that they expect to be busier in 12 months’ time it at its highest level since Feb 2022.
“Consistent with this, materials purchases have picked up markedly and builders are taking on additional staff at the fastest pace in a year.”
He said that while residential activity eased slightly, the pace of contraction has softened considerably. “This aligns with other positive indicators in the sector,” he continued.
“The Dublin Housing Supply Co-ordination Task Force counted 18,600 new dwellings under construction in the capital at the end of September 2022, and further 3,488 have been commenced in the capital since then – a 42 per cent year-on-year increase,” he said.
“Meanwhile, 2023 is set to be the biggest ever year of warehouse construction in Dublin, and potentially the biggest year for office building since 2008.”
The data shows decreases in both housing and civil engineering activity in February, though rates of reduction eased to four- and 11-month lows respectively. Bucking the wider trend, commercial activity increased modestly and for the first time since last September.
Alongside the softer downturn in activity, a renewed expansion in new business volumes provided further signs of market improvement. The latest upturn, albeit only slight, was the first registered since last March.
Construction firms registered a second successive month of employment growth midway through the first quarter of 2023 with the latest upturn strong overall and the most pronounced since last May.
February data was also indicative of a renewed uptick in input buying, breaking the prior eight-month sequence of decline.
Where firms did purchase inputs, they were again faced by delivery delays. Supply-chain disruption remained the main factor causing longer lead times. However, while marked, the latest deterioration in vendor performance was the least pronounced since January 2020.
Meanwhile, growth forecasts across Ireland’s construction sector were positive for the sixth month in a row and the degree of optimism was the brightest in a year amid reports of improving project pipelines and increased client engagement.
Some hesitancy did, however, remain in the fact that overall sentiment remained below its long-run average.
On a more negative note, cost pressures faced by Irish construction companies worsened. Following two months of easing, the rate of cost inflation re-accelerated from January.
The same was the case for subcontractor rates which increased at the fastest pace in three months. The quality and availability of subcontractors, however, deteriorated but there was renewed and marked growth in usage.
