Construction activity slows as contractors struggle to secure new orders

Construction slowed for the fourth month running in January as contractors struggled to secure new orders, the latest figures show.

Monday’s construction purchasing managers index (PMI), published by bank BNP Paribas Real Estate Ireland, registered overall activity in the industry at 47.7 in January. Any result below the index benchmark of 50 indicates a decline in business, while any reading above that figure indicates growth.

January’s reading was the fourth monthly decline in a row, but the slide was less pronounced than the fall to 43.2 recorded in December.

Rising costs and falling demand have weighed on construction since late last year. Builders struggled to secure new orders during January, the bank reports. However, less stringent mortgage rules and aid for renters have boosted optimism, prompting companies to begin hiring staff again.

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Rising materials and energy costs continued to bite, but inflation was at its slowest in two years during January. Meanwhile, delays in getting supplies were at their shortest since February 2020.

Activity in all three industry subdivisions that the index tracks fell last month. House building slowed to 45.2, commercial construction dipped to 49, while civil engineering, mostly big, State-funded projects, tumbled to 44.2.

However, John McCartney, director and head of research at BNP Paribas Real Estate Ireland, said January’s index was more upbeat than recent months, as costs rose at their slowest rate for years while supply bottlenecks eased.

“Moreover, there are positive signs for the year ahead,” he said. “The relaxation of bank and local authority mortgage rules and the raising of price caps in the Government’s shared equity scheme will give builders greater confidence in future selling prices.”

He added that new housing starts picked up strongly in recent months while builders have resumed hiring and now expect to be busier this time next year.