According to the BNP Paribas Real Estate Ireland Construction Purchasing Managers Index (PMI), recent price pressures have resulted in the construction sector contracting in June 2022. This marks the first time it has decreased in size since April 2021.
Director and Head of Research at BNP Paribas Real Estate Ireland, John McCartney, comments that, “June has been a watershed month for construction activity. The post-Covid rebound has been fading since February, but the June PMI reflects the first absolute pull-back since pandemic restrictions were lifted. A recurring theme is that costs are rising faster than the value of delivered properties, squeezing viability.”
The PMI established that viability of projects was put under pressure because costs rose faster than the value of delivered properties.
Material prices also continued to escalate, and labour added to inflationary pressures. “The number of people working in construction rose by 30% in the year to March, and the resulting labour scarcity has driven construction wage growth to nearly 9% per annum,” said Mr McCartney. “However, the June PMI suggests that this is beginning to regulate itself – order books were weaker for the third month in a row and employment growth in the sector has stalled for the first time since we came out of lockdown.”
The most contraction in the sector was seen in commercial property construction, compared to that in the residential arena.