Construction activity growth speeds up on improved demand
Growth in the Irish construction sector accelerated at the start of the year as the impact of the Omicron wave of Covid-19 subsided and demand rose.
This is according to the first BNP Paribas Real Estate Ireland Construction Total Activity Index.
More work and greater optimism saw construction firms increase purchasing in January – as well as hiring more staff. But input costs continued to rise during the month.
The headline seasonally adjusted PMI rose to 56.1 in January, up from 53.7 in December. Any figure over 50 signals growth.
Activity has now increased for nine successive months, with construction companies mainly linking the latest rise to improving demand.
BPN Paribas noted that all three categories of construction recorded growth of activity in January, marking the third month in a row of record growth.
It said that consistent with the sharp rise in commencement notices since last March, home-building activity expanded at a quicker pace in January.
But the sharpest acceleration occurred in the commercial sector where the activity index rose from 54.5 in December to 56.7 in January.
Based on projects already onsite, 2022 is expected to be the strongest year since the global financial crisis for Dublin office completions, the bank said.
There is also now increased logistics construction ongoing around Dublin as developers respond to a rising demand for storage space due to strong goods consumption and supply-chain reconfigurations, it added.
Today’s survey shows that improvements in demand were also evident with regards to new orders, which increased for the tenth month in a row and at a faster pace than in December.
Meanwhile, positive expectations around future inflows of new work and greater confidence that the Covid-19 pandemic will not prove disruptive to operations during the year also supported a sharp increase in business optimism.
BNP Paribas noted that firms were at their most confident since the outbreak of the pandemic, with sentiment the strongest since August 2018.
This confidence, along with an improving demand situation, encouraged construction firms to expand their staffing levels and purchasing activity during January.
Employment increased for the tenth month in a row – and at a marked pace, it added.
But global material shortages continued to feed through to higher input costs, with increased charges for energy and shipping also reported.
Today’s index showed that input prices rose at a considerable pace, and one that was faster than in the previous month.
John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, said the key signal emerging from Irish construction firms in January is confidence.
Mr McCartney noted that the Future Expectations Index reached 75.3 in January – its highest point in well over three years.
“But rising confidence can also be inferred from construction companies’ hiring behaviour. Employment in the panel of surveyed firms has been expanding month-on-month since April 2021, and the pace of hiring accelerated in January,” he said.
“Employers generally only on-board extra staff when they are confident that activity will be sustained so this, along with further growth in new orders during January, augurs well for construction activity in the months ahead,” he added.