Construction activity drops for a fourth straight month
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Construction activity contracted again last month, the fourth consecutive monthly reduction in output.
According to the seasonally adjusted Construction Total Activity Index, the pace of decline was solid and faster than that seen in September but was less pronounced than the contractions recorded over the summer.
The survey of 150 construction firms shows a general slowdown in market conditions reported by panellists. Rising prices for a range of inputs meant that overall expenses increased markedly again in October. However, the rate of inflation softened to a four-month low amid some signs of prices for certain items easing.
BNP Paribas Real Estate Ireland director and head of research John McCartney said the slowdown in residential activity during October seems surprising given the continued growth in housing commencements and completions this year. “But the explanation is simple: completions have been rising faster than commencements in recent months, causing the number of units under construction to edge lower,” he said.
“The expansion in commercial activity might also seem surprising as there has been little large-scale retail development and as the office market is already oversupplied.
Again, however, the explanation is straightforward. Over 26,000sq m of Dublin office space that was earmarked for completion in the third quarter got delayed until the fourth quarter. With a further 75,000sq m already scheduled for the fourth quarter delivery, there is now a strong push to get projects completed by year-end.” “The medium-term outlook for residential and commercial construction is quite contrasting. Over 18,000 new dwellings are currently underway in Dublin alone, and 2024 should be another strong year for housing delivery. However, speculative office starts have dried up in response to market signals, and the supply pipeline falls away sharply from next year.” The overall construction index reported 47.3 down from 48.6 in September. Any figure below 50.0 reports a contraction in activity.
The commercial Index, at 50.9 returned to growth in October, thereby ending a three-month sequence of decline. However, the rate of expansion was marginal.
Employment was another positive. It increased again in October extending the sequence of growth to 10 months. Moreover, the rate of job creation was solid and faster than that seen in the preceding survey period.
Companies also maintained an optimistic outlook for the coming year amid hopes that new projects would be secured, thereby feeding through to growth of activity. However, sentiment dropped sharply over the month and was the lowest since November last year. There were some concerns about the potential impact of a weaker economic climate on activity in the sector.
Most recent figures for August from the State Housing Agency show construction began on 2,770 homes, the largest amount in August in the past five years.