Growth in the Irish construction sector slowed in the first quarter of the year, according to the BNP Paribas Real Estate Ireland Construction Total Activity Index.
It shows that activity, new orders and employment all rose at slower rates, while business confidence dropped sharply.
It comes amid near-record increases in input costs, with more than 83% of respondents stating that such costs had risen in March.
“Arising from supply chain issues and sharp hikes in oil and gas prices, building firms experienced the second fastest growth in input costs since the index began 22 years ago,” said John McCartney, Director and Head of Research at BNP Paribas Real Estate Ireland.
“This tips the balance against marginally profitable developments, softening growth in the demand for construction services,” he said.
The headline seasonally adjusted PMI dropped to 53.9 in March, well down from the reading of 58.4 in February.
However, any figure over 50 signals growth.
While March still saw an expansion in total construction activity over the month, it was one of the softest this year so far.
“This was the lowest level of order book growth in 12 months, and the March reading may be flattered by advance orders from clients seeking to get ahead of inflation and secure scarce materials,” Mr McCartney said.
The housing and commercial categories posted equally marked rises in activity during March, with both seeing a softer expansion than in the previous month.
Meanwhile, civil engineering activity dropped for the first time in five months.
The report states that anecdotal evidence suggested that the easing in growth of activity was in line with a “softer” demand environment.”
According to the report, the impact of rising prices on customer demand led to a sharp drop in sentiment at the end of the first quarter.
Optimism declined to the second-largest degree on record, behind only that seen at the start of the Covid-19 pandemic – and was the lowest since October 2020.
Despite the drop in confidence, higher new orders encouraged construction firms to increase their staffing levels again in March.
However, the rate of job creation eased to the slowest since April last year.
A weaker rise in the use of sub-contractors was also registered, while their availability continued to decline.