3 days ago
- Business
- Irish Independent
Housing activity drops for first time in nine months, but input costs rise sharply
The headline figure for the AIB Ireland Construction PMI dipped to 49.2, down from 52.4 in April, and below the 50 no-change mark, indicating a slight reduction in total construction activity.
Uncertainty around US trade policy is thought to be one reason for the dip. New orders continued to grow, but the rate of expansion was at a three-month low.
The decrease in housing activity ended an eight-month sequence of growth, but the rate of decline was less than in the civil engineering sector.
Commercial activity continued to rise, following a good showing in April.
John Fahey, senior economist with AIB, noted that the headline index suggested a modest contraction in activity levels for construction, the first time since February it had fallen below 50.
'There were some encouraging signs contained in other aspects of the May report,' he said.
'New orders, which are regarded as a leading indicator, expanded for the fourth month in a row, although the pace of growth was at a three-month low. The construction sector also continued to increase its staffing levels.
'Employment rose at its fastest pace since January as firms prepared for the start of work on new projects.
'Firms in the construction sector continued to hold an optimistic view that activity levels will increase over the coming 12 months. This outlook was underpinned by the prospect of new projects getting under way.'
Input costs increased sharply again, with the pace of inflation little changed from April, which was itself above the series average. Sub-contractor rates also rose rapidly, with the pace unchanged from the one-year high recorded in April.
When construction companies bought materials in May, they were again faced with lengthening delivery times, which they sometimes linked to staff shortages at suppliers.
Staffing levels rose for a third consecutive month, although modestly. The rate of expansion in the use of sub-contractors also quickened.
Sub-contractor availability decreased to the largest extent since June 2022.
The rise in new orders, and the impending start of new projects, contributed to the optimism in the construction sector about the year ahead.
The AIB Ireland Construction PMI survey is compiled by S&P Global from responses to questionnaires sent to a panel of about 150 construction firms.
