Construction activity in Ireland continued to decrease in October, but the pace of decline slowed significantly from September, according to the latest AIB Construction PMI survey. The report highlighted a near-stabilisation of new orders and a return to growth in commercial construction, providing a modest boost to the sector as the final quarter of the year began.
The seasonally adjusted Construction Total Activity Index rose to 48.1 in October, up from 43.7 in September. While still below the 50 no-change threshold, the reading signalled a much weaker reduction in overall construction activity, marking the softest decline since June. Output has now fallen in each of the past six months.
The survey showed that commercial construction activity expanded slightly last month, ending a three-month contraction. Residential projects, in contrast, recorded the sharpest decline in over two and a half years, while civil engineering continued to contract, though at a slower pace than in September.
Despite signs of stabilisation in new orders, customer caution and delays in decision-making kept overall demand subdued. The decline in new business was marginal, the weakest in the current three-month sequence of contraction, and some firms reported busier workloads than in previous months.
With workloads easing, companies reduced staffing levels and purchasing activity. October marked the first back-to-back employment reductions since the end of 2022, while input buying fell for the fourth consecutive month. Companies continued to report rising costs, including higher fuel and raw material prices, with inflation in construction inputs moving broadly in line with the series average.
John Fahey, Senior Economist at AIB, said the October survey indicated that building activity was contracting at the start of the fourth quarter, but at a milder pace than in previous months. He noted that the index has remained below the key breakeven level of 50 for six consecutive months, reflecting ongoing challenges in the sector.
“The sectoral breakdown shows divergence among the three main subsectors,” Fahey said. “Commercial construction ended its two-month period of contraction and returned to growth, albeit marginally. Civil engineering continues to contract but at a slower rate than in September, while residential activity accelerated its decline to the weakest level since June.”
The survey highlights the uneven performance within the construction industry as companies face high input costs and cautious demand, particularly in the residential and civil engineering segments. The slight recovery in commercial activity and stabilisation of new orders offer a glimmer of optimism, but sustained pressures on employment and purchasing suggest challenges remain for the sector in the months ahead.
The AIB report underscores the importance of monitoring sector-specific trends, as commercial, residential, and civil engineering projects respond differently to economic conditions, supply costs, and demand fluctuations.
