There has been a fall-off in construction as building firms become more cautious about rising inflation, a new consultant report has found.

A BNP Paribas study found that builders have scaled back buying raw materials and are using up their existing stock as they watch and wait.

The report said the drop-off in activity "reflected softening demand amid caution among clients, price pressures and supply shortages".

The BNP Paribas Real Estate Ireland Construction Index report found there has been "a solid reduction in activity" in four of the past five months.

Housing construction was down only marginally compared to the drop-off in civil engineering projects and large commercial buildings.

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"With demand remaining muted, construction firms scaled back their purchasing. A number of respondents indicated a preference for using up existing inventory as opposed to purchasing new inputs," it reported.

The costs incurred by building firms "continued to increase at a rapid pace in October" and higher raw material prices were often mentioned by developers interviewed for the report.

While raw material delivery has improved since the Covid lockdowns, "companies reported some ongoing issues in supply chains, with the war in Ukraine also hampering deliveries".

Builders were 'optimistic regarding housing demand' but concerned about the economy.

John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, noted residential construction was largely unchanged from September, even if other sectors were down.

"With 20,800 dwellings completed in the first three quarters, our forecast of 28,000 units for the full year is looking good," he said.

The reduction in commercial building "reflects slowing office starts in Dublin where a strong pipeline of projects" will finish in 18 months to meet demand.