Labour costs could be on course to rise in the construction industry as some firms in the sector report difficulties in recruiting staff.

According to the latest Purchasing Managers’ Index from BNP Paribas Real Estate Ireland, wage pressures in the sector have remained “well contained” so far with 23,300 more construction workers being hired last year.

However, the PMI report for February noted that the pace of recruitment has slowed and some firms are now reporting difficulties in finding staff.

“This could ultimately flow-through to wage inflation which would exacerbate existing cost pressures and have knock-on implications for viability,” John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland said.

The report showed construction activity increasing at its fastest pace since last summer’s post-lockdown rebound, with activity and new orders each rising sharply.

However, the rate of input cost inflation remained sharp and supply-chain disruption continued, albeit to a lesser extent.

“Building companies have reported increasing costs for nearly two years, and the input price index remained
elevated in February,” Mr McCartney pointed out.

“Unfortunately things may get worse before they get better,” he added.

Growth was recorded across the three categories of construction covered by the survey.

Activity in the commercial space recorded the sharpest expansion, rising at the fastest pace since June.

Growth in housing activity also accelerated, reaching a five-month high.

“Strong commercial activity has not crowded-out residential construction. Consistent with the sharp rise in
commencements over the last year, the housing activity index accelerated to 58.5 in February, well above
the no-change figure of 50,” John McCartney explained.

“This continues an 11-month run of expansion in housing activity,” he said.

The PMI measures activity on a scale of 1 to 100 with a measure above 50 signalling expansion in a sector.

The headline index increased to 58.4 in February from 56.1 in January.

It was the tenth successive monthly expansion in construction activity, and one that was the most marked since July last year.