Construction activity fell for the third successive month to end the year, according to the latest BNP Paribas Real Estate Ireland construction purchasing managers' index (PMI).
John McCartney, director & head of research at BNP Paribas Real Estate Ireland, described 2022 as "a year of two halves for construction," with strong expansion from January to May giving way to slowing activity from June onwards, and a pronounced slowdown in December.
Challenging economic conditions and falling workloads caused companies to reduce their staffing levels, and supply-chain delays remained pronounced while input prices continued to rise sharply, albeit at the slowest rate since early 2021.
The headline total activity index dropped from 46.8 to 43.2 in November, indicating that the rate of contraction in construction accelerated at the fastest rate since July.
Panellists responding to the survey reported a general market slowdown, with all three monitored categories experiencing activity decreases in December.
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Civil engineering declined quickest, while housing activity was down for the third month running, and commercial projects saw the softest fall in activity, despite the rate of decline increasing.
Some clear trends are now emerging," McCartney said. "Firstly, the slowdown is happening across-the-board with the PMI’s residential, commercial and civil engineering indicators all well below the 50-point watershed.
"Secondly, building firms appear not to be expecting an immediate rebound; They initially took a wait-and-see approach to shrinking order books, maintaining their staff headcounts and continuing to purchase materials.
"But after nine months of new business contraction, panellists have now begun running down stocks and not replacing employees who leave."
New orders saw a similarly-sized decline to total activity as market demand flagged. New Business fell for the ninth consecutive month, and to the greatest extent since last August.
After no change was recorded in November, the modest decrease in employment last month was the largest since March 2021. Lower input buying was also a result of reduced activity requirements, with purchasing activity down for the seventh month running.
A number of panellists reported cost rises across the board, although the rate of inflation was softer than in November and the least marked in 21 months.
Suppliers' delivery times lengthened substantially in December, and at to the largest extent in six months, although delivery days were below average for the year.
Longer lead times reportedly reflected general issues in supply chains, but deliveries were also impacted to some extent by poor weather conditions.
Companies scaled back their usage of sub-contractors in December, thereby ending a three-month sequence of expansion.
The drop in demand for sub-contractors relieved some pressure on supply, contributing to the softest reduction in their availability in just under two years.
Sentiment for the year ahead improved in December, but remained below the series average amid uncertain economic conditions, but some firms predicted a rise in development activity.
McCartney concluded by saying that Irish construction firms "retain a positive medium-term outlook, with a solid majority expecting to be busier this time next year.
"This may reflect recent developments which should assist with current viability challenges. Input price inflation has moderated to its slowest rate for 21 months. In addition, the government’s Croí Cónaithe scheme is being rolled out to subsidise apartment developments that would otherwise not be profitable to build.
"Further government actions, including relaxing mortgage restrictions and raising the shared equity scheme price ceilings, may also underpin builders’ confidence that they will be able to sell properties at prices that make development viable.”
(Pic: Getty Images)
