Activity in the Republic’s construction sector contracted for a second consecutive month in June as work on commercial projects “decreased sharply”.
Housing construction, however, continued to rise with the June expansion described as “solid”.
BNP Paribas’s latest index for the construction sector here fell to 47.5 in June from 49.8 the previous month. A score below 50 signifies a contraction in activity.
The reversal was linked to a “renewed fall” in commercial activity. Work on commercial projects fell, ending a three-month sequence of growth, BNP said. A fall-off in civil engineering activity also added to the decline.
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“Commercial activity surged through the spring and early summer as builders pushed to get large office schemes in Dublin completed,” BNP Ireland’s head of research John McCartney said. “But with campus-scale projects like Coopers Cross and Wilton Park now delivered, activity inevitably eased-back in June,” he said, noting considerable office space remains under development “and the commercial sector should remain relatively busy as this is run-out over the next 18- months”.
Housing activity, however, continued to increase, expanding for a third straight month in June. The latest increase in residential activity was described as “solid and slightly faster” than that seen in May.
[ More workers may be needed to finish house builds, says banking groupOpens in new window ]
BNP said the reduction in total construction activity came despite an increase in new orders.
The expansion of new business was the fourth in a row but softer than in May with some firms indicating they had received repeat orders from existing clients, it said.
The rate of input cost inflation quickened to a 14-month high on the back of rising charges by suppliers and ongoing geopolitical issues, which have caused supply chain delays.
“The Government has been under pressure for some time to increase its home-building targets and its stated intention to revise these to around 50,000 units per annum has underpinned residential builders’ confidence,” Mr McCartney said.
“Activity rose strongly for the fourth successive month in June. As we flagged back in February, this may not result in increased housing completions within the current calendar year,” he said.
“However recent momentum, in conjunction with an upward trend in leading indicators such as commencements, new orders, employment and materials purchases all signal that the longer-term direction of travel remains positive,” he said.
The Government’s Housing for All strategy targets 34,600 completions this year, 36,100 in 2025 and 36,900 in 2026. However, these targets are expected to be revised upwards in the coming months on the back of new research which suggested 35,000-53,000 may be required each year to meet the State’s housing demand.
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