New construction orders fall as costs rise

New orders in the construction sector fell last month, as a result of near-record cost increases, according to the latest BNP Paribas Real Estate Construction Purchasing Managers’ Index for Ireland.

However, despite depressed demand, purchases, activity and employment increased even more, it found.

“The latest PMI confirms that construction activity continued to expand in April, but was variable by sector,” said John McCartney, director and head of research at BNP Paribas Real Estate Ireland.

“The housing sub-index indicates that the strong residential activity seen in the first quarter continued into April, despite headwinds from supply chain disruption and rising costs. The business activity indicator also showed solid expansion,” McCartney said.

“This is not a surprise, as the portfolio of office and logistics properties to be delivered this year is at its highest level since 2008. However, civil engineering was notably weak, with the April reading showing an outright contraction.” in business for the second consecutive month. he added she.

“This is consistent with reports that rising energy and material prices made contractors less willing to accept public works contracts.”

Overall, the headline index fell marginally from 53.9 in March to 52.5 in April.

That marked the second straight month it fell, though it indicated construction activity was growing.

“Some companies reported catching up on backlogs, but price increases and subdued demand acted to restrain growth,” BNP Paribas Real Estate Ireland said.

“April saw sharp but slower increases in residential and commercial project activity, while civil engineering activity declined for the second month in a row,” it added.

Despite the drop in new orders, some respondents indicated that demand for housing projects continued to strengthen.

“Cost pressures were severe in April. Businesses highlighted the second-fastest increase in input prices since the survey began in June 2000, just behind the record set in October 2021,” it said.

“It was widely reported that energy and fuel prices have risen, with global inflationary pressures, raw material shortages and the conflict in Ukraine all key factors behind the rising cost burden.”

Buying activity increased at the slowest pace this year due to the influence of rising costs and declining demand.

“Delivery times from suppliers continued to lengthen noticeably, with material shortages and the conflict in Ukraine disrupting supply chains,” BNP said.

“That said, the rate at which lead times were lengthened was the least pronounced since August 2020,” it said.

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