BNPPRE Construction PMI - January 2023

Embargoed until 0101 GMT (0101 UTC) 13 February 2023

BNP Paribas Real Estate Ireland Construction PMI ® Sustained but softer declines in activity and new business at the start of 2023

Fresh employment growth Input cost inflation drops to two-year low Year-ahead outlook strengthens to 11-month high

Ireland Construction Total Activity Index

47.7 Jan ‘23 Dec:43.2

subdued market conditions. That said, the latest decrease was notably weaker than in December and the softest since the current downturn first began last October. Broken down by sector, the contraction was broad-based but softer across all three monitored categories. As has been the case in each of the past 11 months, civil engineering firms recorded the strongest decline. Commercial activity saw the softest fall and one which was only mild while housing activity declined for the fourth month in a row. Faced with challenging economic conditions, firms reportedly struggled to secure new orders and registered another contraction in January. That said, there were tentative signs of improvement in the fact that the latest reduction was the joint-weakest in the current ten-month sequence of decline.

The sector registered a sustained contraction in activity in the first month of 2023 with subdued market conditions reportedly remaining a key constraint in overall sector performance. That said, rates of reduction for both output and new orders softened notably from December and there was a fresh increase in staffing numbers. Cost and supply pressures displayed signs of easing. In fact, the rate of input cost inflation eased to a two-year low while lead times lengthened to the least extent since February 2020. Irish construction The headline seasonally adjusted BNP Paribas Real Estate Ireland Construction Total Activity Index posted at 47.7 in January, up from 43.2 in December and indicative of a fourth successive monthly reduction in Irish construction output at the aggregate level. Where falling output was reported, panellists often mentioned

Aug ‘22 - Jan ‘23

BNP Paribas Real Estate Ireland Construction Total Activity Index sa, >50 = growth since previous month

0 10 20 30 40 50 60 70 80 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23

BNP Paribas Real Estate Ireland Construction PMI ®

Contents Overview Comment Activity by sector Demand, jobs and outlook Purchasing Subcontractors

Overview continued...

The sustained drop in output and demand led firms to decrease input buying for an eighth month in a row. The rate of reduction remained solid but was the softest since last October. Meanwhile, Irish constitution firms added to their workforces for the first time in three months, albeit only marginally. Irish construction firms faced another round of sharp input cost inflation as prices reportedly continued to rise across a broad range of products. In some more positive news, the rate of inflation softened for a second month in a row and was the least pronounced in two years. Staying on prices, sub- contractor rates increased at an accelerated and marked pace.

Supply pressures eased in January, highlighted by the softest lengthening in lead times since February 2020. January data pointed to sustained falls in sub-contractor availability, usage, and quality. That said, in all three cases rates of decrease softened from December. In fact, the rate of decline in availability was the weakest in 28 months. The outlook for activity over the coming 12 months brightened in the first month of 2023, with confidence strengthening to an 11-month high. Optimism reportedly stemmed from hopes that demand conditions would improve in the future, with new projects set to begin in the coming months.

Survey methodology Further information

Activity Index by sector sa, >50 = growth since previous month

Housing / Commercial / Civil Engineering

0 10 20 30 40 50 60 70 80

'16

'17

'18

'19

'20

'21

'22

'23

Comment

Commenting on the latest survey results, John McCartney, Director & Head of Research at BNP Paribas Real Estate Ireland, said:

"Construction slowed slightly in January, but this month’s PMI is distinctly more upbeat than those of recent months. Although input costs are still rising, the rate of increase is at its slowest for two years. Meanwhile supply chain delays have eased somewhat, perhaps reflecting the reopening of the Chinese economy. Moreover there are positive signs for the year ahead. The relaxation of bank and local authority mortgage rules, and the raising of price caps in the Government’s shared equity scheme will give builders greater confidence in future selling prices. Meanwhile the

new Renter Tax Credit and a widening of the net for social housing support will help underpin the rental market. With confidence at an 11 month high, housing commencements have picked-up strongly in recent months, construction firms have resumed hiring, and 85% of builders now expect to be as busy or busier in one year’s time.”

BNP Paribas Real Estate Ireland Construction PMI ®

Activity by sector Residential

45.2

Housing Activity Index

Housing Activity Index sa, >50 = growth since previous month

Jan ‘23

Residential building activity remained firmly within contraction territory at the start of the year, thereby extending the current sequence of decline to four consecutive months. Despite softening to a three-month low, the pace of decline was solid. Commercial The seasonally adjusted Commercial Activity Index posted below the neutral 50.0 threshold in January to signal a fourth consecutive month where the level of construction work undertaken for commercial purposes had decreased. That said, the rate of reduction softened from December, was only mild and the weakest of the three monitored construction sub-categories. Civil Engineering As has been the case in each of the past 11 months, activity at civil engineering firms decreased in January. The rate of decline eased markedly from the preceding month and was the softest since May last year. That said, the reduction remained marked and was the strongest of the three monitored sectors.

0 10 20 30 40 50 60 70 80 '07 '09 '11 '13 '15 '17 '19 '21 '23

Aug ‘22 - Jan ‘23

Jan ‘23 49.0

Commercial Activity Index

Commercial Activity Index sa, >50 = growth since previous month

0 10 20 30 40 50 60 70 80 '07 '09 '11 '13 '15 '17 '19 '21 '23

Aug ‘22 - Jan ‘23

Civil Engineering Activity Index

Civil Engineering Activity Index sa, >50 = growth since previous month

44.2 Jan ‘23

0 10 20 30 40 50 60 70 '07 '09 '11 '13 '15 '17 '19 '21 '23

Aug ‘22 - Jan ‘23

BNP Paribas Real Estate Ireland Construction PMI ®

Demand and jobs New orders

New Orders Index sa, >50 = growth since previous month

New Orders Index Aug ‘22 - Jan ‘23

Once again, the level of new work received by Irish constructors fell in January, stretching the current sequence of falling order book volumes to ten months. Reportedly, the latest drop in orders was reflective of muted underlying demand conditions. The downturn, however, was only slight and the joint weakest since the sequence of reduction began last April.

0 10 20 30 40 50 60 70 80 '07 '09 '11 '13 '15 '17 '19 '21 '23

Employment Index sa, >50 = growth since previous month

Employment Index Aug ‘22 - Jan ‘23

Employment For the first time in three months, the

20 25 30 35 40 45 50 55 60 65 70 '07 '09 '11 '13 '15 '17 '19 '21 '23

seasonally adjusted Employment Index posted above the 50.0 mark of no-change in January to indicate a fresh rise in staffing numbers. That said, the rate of job creation in Ireland's construction sector was only marginal.

Business expectations

Looking at their prospects for the year ahead, Irish construction firms remained upbeat. In fact, the degree of confidence was the strongest in almost a year. Reportedly, optimism was largely centred around hopes that market conditions would improve over the course of 2023. Calendars have also started to fill up with new projects scheduled to begin within the coming months. That said, the index remained historically subdued.

Future Activity Index Aug ‘22 - Jan ‘23

Future Activity Index >50 = growth expected over next 12 months

20 30 40 50 60 70 80 90 '07 '09 '11 '13 '15 '17 '19 '21 '23

BNP Paribas Real Estate Ireland Construction PMI ®

Purchasing Quantity of purchases

Quantity of Purchases Index sa, >50 = growth since previous month

Quantity of Purchases Index

Irish construction firms continued to cut back on purchasing in the first month of 2023, thereby stretching the current sequence of reduction to eight months. The rate of decline, though solid, was the softest since last October. Anecdotal evidence suggested that firms decreased input buying to match current muted levels of demand. Suppliers' delivery times As has been the case since July 2011, supplier performance in the Irish construction sector worsened in January. Panel members mentioned that ongoing supply chain issues was a pivotal factor contributing to the latest deterioration. That said, there were tentative signs of easing supply pressures, highlighted by the respective seasonally adjusted index rising to a 35-month high. Input prices Average operating expenses faced by Irish construction firms increased sharply in January. Survey respondents indicated that prices had risen across a broad range of products. That said, the rate of input cost inflation weakened markedly from December and reached its lowest level in exactly two years.

0 10 20 30 40 50 60 70 '07 '09 '11 '13 '15 '17 '19 '21 '23

Aug ‘22 - Jan ‘23

Suppliers' Delivery Times Index sa, >50 = faster times since previous month

Suppliers' Delivery Times Index

0 10 20 30 40 50 60 70 80 '07 '09 '11 '13 '15 '17 '19 '21 '23

Aug ‘22 - Jan ‘23

Input Prices Index sa, >50 = inflation since previous month

Input Prices Index

20 30 40 50 60 70 80 90 100 '07 '09 '11 '13 '15 '17 '19 '21 '23

Aug ‘22 - Jan ‘23

Items up in price Cleaning Products Concrete Electricity Fibre Boards Gas Heating Products Insulation Iron

Items down in price Diesel Steel

Items in short supply Electrical Items Engineering Components Insulation

Timber Wages

Labour Metals Paint Paper

Plumbing Printer Ink Salt Stationary Steel Timber Waterproofing Membranes

BNP Paribas Real Estate Ireland Construction PMI ®

January data was indicative of a back-to- back decrease in sub-contractor usage. The rate of reduction in sub-contractor availability subsequently softened and was the weakest since the current downturn first began in October 2020. That said, sub-contractor rates increased at an accelerated pace, much sharper than its series average. Meanwhile, the quality of sub-contractors continued to deteriorate in January, albeit at a softer pace than in December. Subcontractors

Subcontractors in short supply

Subcontractor Usage Index Aug ‘22 - Jan ‘23

Block Layers Carpenters Concrete Layers Ecologists Electricians Fabricators Geohydrologists

Mechanical Metalworkers Ornithologists

Plasterers Plumbers Visual Impact Specialists

Subcontractor Availability Index

Subcontractor Usage Index sa, >50 = growth since previous month

Subcontractor Availability Index sa, >50 = improvement since previous month

Aug ‘22 - Jan ‘23

20 30 40 50 60 70 80 90 '07 '09 '11 '13 '15 '17 '19 '21 '23

0 10 20 30 40 50 60 70 '07 '09 '11 '13 '15 '17 '19 '21 '23

Subcontractor Quality Index Aug ‘22 - Jan ‘23

Subcontractor Quality Index sa, >50 = improvement since previous month

Subcontractor Rates Index sa, >50 = inflation since previous month

30 35 40 45 50 55 60 65 '07 '09 '11 '13 '15 '17 '19 '21 '23

40 45 50 55 60 65 70 75 '07 '09 '11 '13 '15 '17 '19 '21 '23

Subcontractor Rates Index Aug ‘22 - Jan ‘23

45 50 55 60 65 70

BNP Paribas Real Estate Ireland Construction PMI ®

Survey methodology

The BNP Paribas Real Estate Ireland Construction PMI ® is compiled by S&P Global from responses to questionnaires sent to a panel of around 150 construction companies. The panel is stratified by company workforce size, based on contributions to GDP. Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable. The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted. The headline figure is the Total Activity Index. This is a diffusion index that tracks changes in the total volume of construction activity compared with one month previously. The Total Activity Index is comparable to the Manufacturing Output Index and Services Business Activity Index. It may be referred to as the ‘Construction PMI’ but is not comparable with the headline manufacturing PMI figure. Underlying survey data are not revised after publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. For further information on the PMI survey

Survey panel size

Survey questions

150

Total activity

Quantity of purchases

Housing activity

Suppliers' delivery times

construction firms

Commercial activity

Input prices

Civil engineering activity

Subcontractor usage

New orders

Subcontractor availability

Employment

Subcontractor quality

% 'Higher' + (% 'No change')/2 + (% 'Lower') x 0 Index calculation

Future activity

Subcontractor rates

Index interpretation 50.0 = no change since previous month

2 3

7 8

1 Growth

6 Decline, from no change

2 Growth, faster rate

7 Decline, faster rate

3 Growth, same rate

8 Decline, same rate

4 Growth, slower rate

9 Decline, slower rate

5 No change, from growth

10 No change, from decline

methodology, please contact economics@ihsmarkit.com.

Survey dates and history Data were collected 12-30 January 2023. Survey data were first collected June 2000.

Sector coverage Construction PMI data include responses from companies operating in the entire construction sector, including the following ISIC Rev.4 codes: 41 Construction of buildings

43.29 Other construction installation 43.31 Plastering 43.32 Joinery installation 43.33 Floor and wall covering 43.34 Painting and glazing 43.39 Other building completion and finishing 43.91 Roofing activities 43.99 Other specialised construction activities n.e.c.

electricity and telecommunications 42.91 Construction of water projects 42.99 Construction of other civil engineering projects n.e.c. 43 Specialised construction activities 43.11 Demolition 43.12 Site preparation 43.13 Test drilling and boring 43.21 Electrical installation 43.22 Plumbing, heat and air-conditioning installation

41.10 Development of building projects 41.20 Construction of residential and non- residential buildings 42 Civil engineering 42.11 Construction of roads and motorways 42.12 Construction of railways and underground railways 42.13 Construction of bridges and tunnels 42.21 Construction of utility projects for fluids 42.22 Construction of utility projects for

BNP Paribas Real Estate Ireland Construction PMI ®

Contact

John McCartney Director & Head of Research BNP Paribas Real Estate Ireland T: +353 (0) 1 661 1233 M: +353 87 974 8485 john.mccartney@bnpparibas.com www.realestate.bnpparibas.ie

Priya Chavva Business & Marketing Coordinator BNP Paribas Real Estate Ireland T: +353 (0) 1 661 1233 M: +353 87 960 4985 priya.chavva@bnpparibas.com

Sabrina Mayeen Corporate Communications S&P Global Market Intelligence T: +44 (0) 7967 447030 sabrina.mayeen@spglobal.com

About S&P Global S&P Global (NYSE: SPGI) S&P Global provides essential intelligence. We enable governments, businesses and individuals with the right data, expertise and connected technology so that they can make decisions with conviction. From helping our customers assess new investments to guiding them through ESG and energy transition across supply chains, we unlock new opportunities, solve challenges and accelerate progress for the world. We are widely sought after by many of the world’s leading organizations to provide credit ratings, benchmarks, analytics and workflow solutions in the global capital, commodity and automotive markets. With every one of our offerings, we help the world’s leading organizations plan for tomorrow, today.

About BNP Paribas Real Estate BNP Paribas Real Estate, one of the leading international real estate providers, offers its clients a comprehensive range of services that span the entire real estate lifecycle: Property Development, Transaction, Consulting, Valuation, Property Management and Investment Management. With 5,000 employees, BNP Paribas Real Estate as a one stop shop company, supports owners, leaseholders, investors and communities thanks to its local expertise across 30 countries (through its facilities and its Alliance network) in Europe, the Middle-East and Asia. BNP Paribas Real Estate is a as part of the BNP Paribas Group, a global leader in financial services.

About PMI Purchasing Managers’ Index ® (PMI ® ) surveys are now available for over 40 countries and also for key regions including the eurozone. They are the most closely watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique

ihsmarkit.com/products/pmi.html.

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