Uncertainty caused by the war in the Middle East led to a renewed contraction in the Irish construction sector in April, a new survey shows today.
The AIB Ireland Construction Total Activity Index dropped back below the 50 no-change mark in April, falling to 47.1 from 53.2 in March.
AIB noted that the reading signalled a first fall in total activity for three months, adding that the fall was the fastest since last November.
Today's report shows that new orders fell for the first time in five months, prompting a renewed fall in construction activity, while business confidence weakened.
AIB said that the nationwide fuel protests contributed to a substantial lengthening of suppliers' delivery times and input cost inflation surged higher.
But on a more positive note, constructors continued to increase their staffing levels.
The survey reveals that housing activity decreased for the first time in three months, joining the civil engineering category in contraction mode.
Commercial was the only construction type to record an increase in activity in April, but the rate of expansion was only marginal and the slowest in the current three-month growth sequence, it added.
Meanwhile, confidence in the outlook for construction activity also waned in April, dropping to the lowest in almost three and a half years.
AIB said that intensifying inflationary pressures were behind the weaker optimism, but some firms remained hopeful that new orders will recover and support growth of activity over the next 12 months.
John Fahey, AIB's Senior Economist, said the construction sector lost momentum at the start of the second quarter as the uncertainty arising from the conflict in the Middle East weighed on activity.
"Looking at the sectoral breakdown, commercial retained its position as the best performing of the three sub-sectors. It posted its third consecutive month of growth, albeit the pace of expansion was much slower compared to the previous two months," the economist said.
"Meanwhile, activity levels in the residential sector contracted in April after registering growth over the February to March period. Elsewhere, civil engineering recorded its 12th successive month of contraction," he added.
He also noted that the new orders index, which is regarded as a leading indicator, experienced a decline for the first time since November.
"The report noted that many respondents linked the fall to projects being put on hold due to the uncertainty caused by the Middle East conflict. The impact of the conflict was also reflected in higher fuel costs contributing to input cost inflation increasing at its highest level since June 2022," he said.
"Meanwhile, the level of optimism regarding the outlook for construction activity was also negatively impacted by the war in the Middle East. Sentiment dipped to its lowest level since late 2022," he added.
