All sectors of the construction industry reported a slowdown in August for the first time in 18 months.
Output was down across the housing, commercial and civil engineering categories, while purchasing activity was also scaled back, the AIB purchasing managers’ index said in an almost universally gloomy assessment of the sector.
There was also a further sharp increase in input costs and an extension of suppliers’ delivery times, it said.
The only glimmer of light was that companies continued to take on staff in August as they remained optimistic that activity will increase over the coming year.
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AIB senior economist John Fahey said the survey of companies in the sector last month pointed to the further loss of momentum in the industry.
At 45.9, the headline index figure was well below the break-even level at 50. It was also lower than the 47.1 level recorded in July, indicating a faster pace of contraction in activity.
The continuing slowdown in activity over recent months comes even as the Government scrambles to find ways of delivering an increasing number of homes to tackle the ongoing housing crisis.
The index is based on a survey of roughly 150 firms which linked the decrease to a lack of tender opportunities and muted customer demand.
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Businesses surveyed reported their input costs had “increased sharply”, with the rate of inflation remaining above the long-run average, adding to the cost of construction.
Further exacerbating challenges to delivery of new homes, material shortages caused suppliers’ delivery times to be extended to the largest degree in six months.
“The sectoral breakdown of the August PMI suggests the downturn in activity levels is becoming more broad-based,” said Mr Fahey.
The PMI indicates that the recent acceleration of activity in the commercial sector over the past six months has faltered, although the contract in that sector was “relatively mild” with an index reading of 49.0.
Activity on new home sites slowed at a faster rate than in July, falling to 44.5 in August having stood at 44.7, but it was civil engineering that performed worst of the three subsectors, at 38.4.
The new orders component of the index, which AIB’s senior economist noted is “regarded as a leading indicator”, slipped for the first time since January.
Despite the sobering results from the survey, Mr Fahey noted that construction firms have “continued to increase their staffing levels” with August extending its streak of growth to six straight months.
“There were also some encouraging signs from the report’s outlook gauge,” he said, while businesses’ projections of activity for the next year strengthened based on “an anticipated improvement in housing activity”.
AIB noted that the use of subcontractors fell for the second consecutive month in August, and at its fastest rate since November 2023. Against this backdrop, the survey found that subcontractors “sharply” increased their rates.
