The AIB Irish Construction PMI found that for the first time in a year and a half, all three categories of the Irish building sector saw a drop in activity. As well as housing, there was a slowdown in civil engineering and commercial, which decreased for the first time in seven months.
The slowdown is bad news for the Government, as it chases an official target of building 41,000 housing units this year. Up to the end of June, the number of new dwellings completed stood at 15,149, on a non-seasonally adjusted basis.
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In another reflection of the caution in construction, the headline index in the AIB construction survey was 45.9 in August, which was down from 47.1 in July, and is well below the 50 no-change mark. This is the fourth month in a row it has fallen, which suggests a sustained reduction in construction activity.
It was also the sharpest fall in the index since January 2024, further underlining the loss of momentum in the sector.
The downturn in activity levels is becoming more broad-based
“The sectoral breakdown of the August PMI suggests the downturn in activity levels is becoming more broad-based,” John Fahey, a senior economist with AIB, said.
“For the first time since February 2024, all three sub-sectors registered a decline in activity. The commercial sector ended a six-month period of expansion, although the pace of decline was relatively mild. Residential construction activity contracted for a fourth consecutive month and at a marginally faster rate compared to July.
“Civil engineering retained its position as the worst performing of the three sub-sectors. It registered a fourth straight month of contraction.”
A builder on a construction site. Photo: Getty
Output was also down across the three categories, and purchasing activity was scaled back. However, companies did continue to increase employment, in expectation of activity picking up.
The most recent labour force figures from the Central Statistics Office also show that employment numbers have risen strongly in construction this year, which should eventually feed into higher output. In the second quarter of this year, there were 190,300 employed, which was up from 177,800 in the first quarter, and compares with 160,700 in the second quarter of last year.
This upsurge is all the more impressive given that the unemployment rate is hovering around 4pc, generally regarded as virtually full employment.
Meanwhile, inflation is again a concern for construction firms, with input costs up sharply, according to the AIB index. Material shortages meant that suppliers’ delivery times lengthened to the largest extent since February.
The new orders index contracted for the first time since January. ?
The use of sub-contractors decreased for the second month in a row, and at the fastest pace since the end of 2023. Even so, the availability of sub-contractors deteriorated, while the prices they charged went up sharply.
The AIB construction industry is compiled by S&P Global from responses to questionnaires sent to a panel of about 150 construction companies.
Mr Fahey said the survey for August suggests caution due to economic uncertainty in a sector that has long lead-in times, but with an expectation activity levels will eventually pick up.
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