Activity in the construction sector fell off in October as demand remained weak.

That is according to the BNP Paribas Real Estate Ireland Construction Purchasing Managers Index, which recorded decreases in all three categories of housing, commercial activity and civil engineering during the month.

The headline reading signaled a solid reduction in activity, with output now having decreased in four of the past five months.

"Overall activity was dragged lower in October by a continued contraction in civil engineering and commercial building," said John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland.

"The pull-back in commercial reflects slowing office starts in Dublin where a strong pipeline of projects will be coming to completion over the next 18 months to meet occupier demand," he said.

"However we expect to see further strong activity in the logistics sector as occupier demand for warehousing space has led to low vacancy rates and solid rental growth," he added.

But despite the soft demand, employment levels did continue to rise and confidence levels increased also.

Input costs rose rapidly again in October, although at a slower pace in September.

Supply chain problems continued to ease though as the delays reduced to the lowest level since the pandemic began.

"Construction input costs continue to rise quite strongly, but the rate of inflation has now been moderating for one year," said Mr McCartney.

"Any slowdown in cost increases is helpful for development margins and, perhaps reflecting this, building firms generally expect to be busier in 12 months’ time and are still taking-on additional staff."

As a result, business confidence levels rose to an eight month high and there was particular cause for optimism in residential construction.

"The October PMI brought further positive news about residential construction in Ireland, with housing activity holding broadly unchanged from September," said Mr McCartney.

"This follows recent CSO data which showed a 53% rise in housing completions between January and September compared with the same period in 2021," he said.

"With 20,800 dwellings completed in the first three quarters, our forecast of 28,000 units for the full year is looking good," he added.