The BNP Paribas Real Estate Ireland purchasing managers’ index (PMI) increased to 48.6 in September, up from 44.9 in August. A reading below 50 indicates a contraction in activity.
This marks the third consecutive month and the eighth occurrence this year of the index being in negative territory.
Although there was a contraction in activity last month, the slowdown was not as severe as in previous months. Some firms attributed the shrinking activity to a general market slowdown, while others reported signs of improving demand and new orders.
The survey revealed that firms in the construction sector remain optimistic for the future, as the price of steel and insulation have fallen and certain construction firms reported lower wage costs.
“September was a broadly positive month for the construction sector,” said John McCartney, director and head of research at BNP Paribas Real Estate Ireland.
“Activity edged lower, but the slowdown was marginal, and considerably less than in July and August, which were particularly weak months.”
Commercial activity experienced a significant recovery, with the index rising to 49.2 in September, a substantial increase from 41.9 in August.
Housing activity registered a score of 48.9 on the index, indicating a continued contraction but showing improvement from 46.3 in August.
While input prices are still rising, the rate of increase slowed considerably in September, dropping to 56.5 on the index compared to 63.1 the previous month.
“The decrease in cost inflation, at a time when new homes price inflation is at 11%, is positive news for economic viability,” commented Mr McCartney.
“Perhaps reflecting this, the Future Expectations Index shows that construction firms remain quite optimistic, with 81% expecting to be as busy or busier in one year’s time.”
The Government has reported an increase in housing commencements compared to last year, and the completion target of 29,000 for this year is expected to be met.
Additionally, house prices have started to rise again after a period of stagnation, indicating that higher interest rates have not dampened demand. First-time buyer mortgage approvals have also seen a significant increase compared to last year.
The Government is considering providing support for mortgage holders in the upcoming Budget.
The BNP Paribas survey also revealed that construction wage costs decreased in some firms last month, while hiring continued to increase for the ninth consecutive month. Mr McCartney stated that this “suggests that there is no immediate shortage of building workers.”
These findings in the construction sector come after the Irish services sector experienced its slowest rate of growth this year in September, primarily due to high cost pressures.
In addition, Irish manufacturing activity slightly contracted last month after a recovery the previous month. Goods makers saw a significant decline in new orders, influenced by the global economic slowdown affecting export markets.
The BNP Paribas’ construction PMI is compiled by S&P Global, based on responses to questionnaires sent to around 150 construction companies.
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