The November 2023 BNP Paribas Real Estate Construction Purchasing Managers Index (PMI) attributes declines in construction activity to both an economic slowdown and delays in client decision-making, with several projects concluding towards the year-end.
Construction activity has experienced a decline for five consecutive months up to November, a month in which there was the most substantial reduction this year.
The most significant drop occurred in housing activity, registering its largest decline since April. This decline persists despite an 8.4% increase in new dwellings investment in the first three quarters of this year compared to the corresponding period last year. Completions have also risen by 8.8%, and commencements are showing growth.
BNP Paribas Real Estate Construction PMI
BNP Paribas Real Estate Director andHhead of Research, John McCartney comments, “The most likely explanation is that activity has temporarily slowed in October and November due to projects being completed as we approach year-end.”
The increase in interest rates, coupled with escalating construction costs, has instilled a sense of caution among developers. According to the BNP Paribas Real Estate PMI, the outlook for commercial activity next year is comparatively subdued, with early-stage initiatives being affected.
Nevertheless, 2023 is expected to have a record-breaking year for warehouse completions in Dublin, with the Index noting development activity in Cork as well.
Companies have grappled with a significant surge in input prices last month, marking the fastest rate of increase since August. Despite this, the overall inflation rate remains considerably lower than the levels recorded in 2021 and 2022.
The decline in workloads last month contributed to a reduction in staffing levels for some construction firms, marking the first such decline in almost a year. Nonetheless, nearly a third of respondents foresee an upswing in activity in 2024, driven by the commencement of new projects and optimistic expectations for an improvement in economic conditions.