Construction Activity in Ireland Shows Strong Growth, Input Costs Remain a Concern
April marked the fastest rise in construction activity in over two years in Ireland, according to the latest data from the BNP Paribas Real Estate Ireland construction total activity index. The headline seasonally-adjusted index rose to 53.2 in April, up from 51.6 in March, indicating a notable increase in construction activity. This positive trend is a welcome sign for Taoiseach Simon Harris and his government as they work towards ambitious house-building targets.
The index, compiled by S&P Global from responses to a questionnaire sent to about 150 construction firms, shows that the March-April figures represent the first back-to-back monthly expansion in almost two years. This indicates a sustained increase in building activity, with other leading indicators also pointing towards positive growth.
Construction firms reported increases in activity in both housing and commercial projects, with commercial projects experiencing the strongest expansion. Residential activity also saw a solid rise, reversing a trend where completions had been outpacing new starts. In the first quarter of 2024, there were twice as many commencements (11,956) as completions (5,841).
John McCartney, head of research at BNP Paribas Real Estate Ireland, highlighted the uncertainty surrounding the surge in commencements, questioning whether it was a one-off due to builders rushing to avail of a waiver of development contributions before an April 24 deadline, which has since been extended. However, leading indicators on the PMI dashboard suggest that the momentum may be sustained, with new orders, employment, and input purchases all on the rise.
The strong expansion in commercial building is attributed to a long pipeline of office blocks reaching the finishing-out stage. With oversupply in the market, refurbishments and retrofits are expected to account for an increasing share of commercial activity over the medium term.
Despite the positive growth in construction activity, the pace of input-cost inflation remains a concern. While the rate of inflation was stable in April, prices continue to rise, with some companies citing higher oil and transportation costs as contributing factors.
Overall, the construction sector in Ireland is experiencing robust growth, providing optimism for the future, although challenges such as input cost inflation need to be carefully monitored.
