House building slows as Middle East conflict hits orders in Irish construction

House building in the Republic of Ireland has sharply declined as of April, according to the latest AIB survey. The ongoing conflict in the Middle East has created uncertainty, leading to a significant drop in orders across the construction industry. The AIB Ireland Construction Purchasing Managers’ Index reported a decrease in building activity for the first time in three months, falling to 47.1. This index indicates that any reading below 50 signifies a decline in activity, while readings above 50 indicate growth. Notably, house building experienced the most significant decline among the three categories tracked by the index, dropping to 44.4. The decline in house building is attributed to various factors, including the fallout from the Middle East conflict and recent fuel protests that disrupted construction operations. Builders have reported that clients are postponing projects due to the uncertainty surrounding the conflict, which has further complicated the supply chain. The fuel protests, which arose from rising petrol and diesel prices, have also delayed the delivery of essential materials, exacerbating the situation. In the three months leading up to March, approximately 8,400 homes were initiated, raising hopes that the construction sector could complete over 40,000 dwellings by the end of the year. However, the ongoing conflict has led to increased caution within the industry, as highlighted during the recent Irish House Builders’ Association conference. The civil engineering sector, which encompasses taxpayer-funded infrastructure projects, has also seen a decline, with its index falling to 46.7, marking the twelfth consecutive decrease. Despite these challenges, there remains a level of optimism among builders regarding future construction activity. Employment levels continue to rise, driven by growth in new orders from previous months. However, the latest figures indicate that new orders have decreased for the first time in five months, marking the fastest decline since August 2023. Builders are adapting by increasing their purchasing of materials to mitigate the impact of supply disruptions, but the overall outlook remains cautious as the conflict in the Middle East continues to unfold.