A monthly report on Ireland’s construction industry shows that activity in the sector fell in July after a brief recovery in June.

The BNP Paribas Real Estate (BNPPRE) Ireland construction Purchasing Managers' Index (PMI) recorded 45.6 – down from 50.4 in June. Any figure below 50 means that activity fell.

The drop was the sharpest so far this year, and BNPPRE said that activity had now fallen in nine of the past ten months.

Broad decline

The decline was broad, with activity in all three sectors – housing, commercial and civil engineering – falling. The drop in commercial activity was the first in six months.

The overall decline was mainly due to the first fall in new orders since January, according to the survey.

Despite the falloff in workloads in July, construction firms continued to expand their staffing levels, with employment increasing for the seventh consecutive month. The rate of job creation was the fastest since February.

‘Underlying confidence’

The survey showed that 30% of firms were optimistic that demand in the sector would improve over the next 12 months. This represented a slight pick-up in the mood of construction firms compared with June.

John McCartney (director and head of research at BNPPRE) said that this finding demonstrated that building firms were still able to recruit staff despite the tight labour market, and suggested an underlying confidence about the future.

He described the survey’s overall return to contraction in July, however, as “unexpected”.

The survey showed that cost inflation picked up last month, having slowed to a 34-month low in June.

“It remains to be seen if the more timely PMI is picking up early signs of renewed inflationary pressures, or whether this is just a blip,” said McCartney.