BNPPRE Construction PMI - February 2023

Embargoed until 0101 GMT (0101 UTC) 13 March 2023

BNP Paribas Real Estate Ireland Construction PMI ® Near-stabilisation in activity amid fresh new order growth

First upturn in new orders since last March Strong employment growth Rate of cost inflation picks up on the month

Ireland Construction Total Activity Index

49.8 Feb ‘23 Jan:47.7

Decreases were seen in both housing and civil engineering activity in February though rates of reduction eased to four- and 11-month lows, respectively. Bucking the wider trend, commercial activity increased modestly and for the first time since last September. Alongside the softer downturn in activity, a renewed expansion in new business volumes provided further signs of market improvement. The latest upturn, albeit only slight, was the first registered since last March and linked by panel members to strengthening project pipelines and better underlying demand conditions. Irish construction firms responded to expanding order book volumes by adding to their staffing levels and increasing their purchasing activity in February. Irish construction firms registered a second successive month of employment growth midway through

The downturn across Ireland's construction sector moderated during February amid a broad stabilisation in activity levels and fresh growth in new orders. As such, firms registered strong employment growth and the first uptick in input buying since May last year. There was some less positive news on the pricing front. Input costs and sub- contractor rates increased at faster paces than in January. The headline seasonally adjusted BNP Paribas Real Estate Ireland Construction Total Activity Index remained below the neutral 50.0 threshold in February, posting at 49.8 from 47.7 in January. The reading was indicative of a fifth successive reduction in total activity, but having slowed to the weakest over this period the decline was only fractional. Panel members who registered a fall in output often still linked this to relatively subdued market conditions.

Sep ‘22 - Feb ‘23

55

50

45

40

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

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

Overview continued...

the first quarter of 2023 with the latest upturn strong overall and the most pronounced since last May. February data was also indicative of a renewed uptick in input buying, breaking the prior eight-month sequence of decline. Where firms did purchase inputs, they were again faced by delivery delays. Supply chain disruption remained the main factor causing longer lead times. However, while marked, the latest deterioration in vendor performance was the least pronounced since January 2020. Meanwhile, growth forecasts across Ireland's construction sector were positive for the sixth month in a row and the degree of optimism was

the brightest in a year amid reports of improving project pipelines and increased client engagement. Some hesitancy did, however, remain in the fact that overall sentiment remained below its long-run average. On a more negative note, cost pressures faced by Irish construction companies worsened in February. Following two months of easing, the rate of cost inflation re-accelerated from January. The same was the case for sub-contractor rates which increased at the fastest pace in three months. The quality and availability of sub-contractors, however, deteriorated but there was renewed and marked growth in usage.

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: “The ‘green shoots’ in our last PMI strengthened further in February. The pace of contraction continued to slow leaving construction effectively unchanged in the month. More importantly, the forward-looking data are pointing in a distinctly positive direction. New order books are expanding and, through their words and actions, building firms appear to be confident that this will be sustained. The proportion of

construction companies saying that they expect to be busier in 12 months’ time it at its highest level since Feb 2022 – a trend that is also evident in the manufacturing and services PMIs. Consistent with this, materials purchases have picked-up markedly and builders are taking-on additional staff at the fastest pace in a year. "Although residential activity eased slightly, the pace of contraction has softened considerably. This aligns with other positive indicators in the sector. The Dublin Housing Supply Coordination Task Force counted 18,600 new dwellings under

construction in the capital at the end of September 2022, and further 3,488 have been commenced in the capital since then – a 42% year-on-year increase. Meanwhile 2023 is set to be the biggest ever year of warehouse construction in Dublin, and potentially the biggest year for office building since 2008.”

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Activity by sector Residential

46.2

Housing Activity Index

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

Feb ‘23

The seasonally adjusted Housing Activity Index posted below the 50.0 no-change threshold in February to signal a fifth successive drop in the level of work undertaken for residential purposes. Despite softening to a four-month low, the rate of reduction was solid overall and the most pronounced of the three monitored sub-categories. Commercial There was a fresh uplift in commercial construction activity midway through the first quarter of the year. The latest increase was only modest, but the strongest since last May. Of the three categories of construction covered by the survey, commercial building was the only one to register growth in activity levels in February. Civil Engineering February data marked exactly one year whereby activity levels across the civil engineering sub-sector have decreased on a monthly basis. However, while solid overall, the rate of decline eased for the second month in a row to reach an 11-month low.

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

Sep ‘22 - Feb ‘23

55

50

45

40

Feb ‘23 51.5

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

Sep ‘22 - Feb ‘23

55

50

45

40

Civil Engineering Activity Index

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

46.5 Feb ‘23

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

Sep ‘22 - Feb ‘23

55

50

45

40

35

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BNP Paribas Real Estate Ireland Construction PMI ®

Demand and jobs New orders

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

New Orders Index Sep ‘22 - Feb ‘23

Irish construction firms registered a renewed uptick in the volume of new business received in February, thereby ending a ten-month sequence of decline. That said, the rate of growth was only slight. Panel members referenced strengthening project pipelines amid some relative improvement in underlying demand conditions. Employment February data was indicative of a back-to- back rise in staffing levels across Ireland's construction sector. Having picked up notably from January, the rate of job creation was strong and the most pronounced since last May.

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

55

50

45

40

Employment Index sa, >50 = growth since previous month

Employment Index Sep ‘22 - Feb ‘23

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

60

55

50

45

Business expectations

Confidence about output over the coming year strengthened further midway through the first quarter of 2023 and reached the highest level in a year. Firms were hopeful for general market improvements amid specific mentions of expanding project pipelines and increasing client interest. Around 35% of respondents predicted a rise in activity over the next 12 months, but with approximately 14% expecting a fall the overall degree of positive sentiment remained just below the long-run average.

Future Activity Index Sep ‘22 - Feb ‘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

65

60

55

50

45

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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 posted a renewed rise in purchasing activity midway through the first quarter of the year, breaking an eight-month sequence of decline. Albeit only mild overall, the latest upturn was strong by historical standards. Respondents often mentioned increasing rates of input buying in line with higher business activity and efforts to build up stocks. Suppliers' delivery times Irish construction firms continued to report issues in supply chains in February, hence resulting in a further lengthening in average delivery times. However, there were some further signs of easing supply pressures. The rate of deterioration in vendor performance eased for the second month in a row with the latest decline the weakest since January 2020. Input prices As has been the case since May 2020, input prices across Ireland's construction sector increased in February. Having accelerated from January's two-year low, the latest round of inflation was historically sharp although remained softer than seen over much of the past two years. Still, approximately 42% of respondents recorded a rise in operating expenses compared with just 5% who posted a fall.

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

Sep ‘22 - Feb ‘23

55

50

45

40

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

Sep ‘22 - Feb ‘23

55

50

45

40

35

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

Sep ‘22 - Feb ‘23

80

70

60

50

40

Items up in price Air Sealing Materials

Items down in price Fuel Reinforcement

Items in short supply Electrical Items Insulation Timber

Blocks Boilers Concrete Electronics Fittings Hollow Section Insulation Insurance Metal Pipe Paints Plaster Board Steel Steel Plate

Steel Mesh Steel Rebar Wages

Timber Tubing

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BNP Paribas Real Estate Ireland Construction PMI ®

Subcontractors

Subcontractors in short supply

February data highlighted a renewed upturn in sub-contractor usage at Irish construction companies. In fact, the increase was marked and the strongest since June 2021. Sub- contractor availability subsequently declined in February and at the fastest pace in four months. The rates charged by sub-contractors increased sharply again, and to the greatest extent since last November, but their quality was deemed to have deteriorated further, albeit at a softer rate than in the preceding month.

Subcontractor Usage Index Sep ‘22 - Feb ‘23

All Trades Blocklayers Carpenters Contractors Ecologists Electricians Geohydrologists

Glazers Joinery Contractors Ornithologists

60

Plasterers Plumbers Visual Impact Specialists

55

50

45

Subcontractor Availability Index

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

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

Sep ‘22 - Feb ‘23

55

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

50

45

40

Subcontractor Quality Index Sep ‘22 - Feb ‘23

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

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

55

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

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

50

45

40

Subcontractor Rates Index Sep ‘22 - Feb ‘23

45 50 55 60 65 70

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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

60

2 3

1

4

55

5

50

10

45

6

9

40

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 10-27 February 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

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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

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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

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