Activity in Ireland’s construction sector continued to decline in December, marking the eighth consecutive month of contraction, but new data from the AIB Construction Purchasing Managers’ Index (PMI) suggests the pace of reduction is easing.
The survey found that residential, commercial, and civil engineering activity all fell during the month, though the rate of decline slowed across all three categories. Residential construction experienced the softest drop in seven months, highlighting some resilience in the housing market.
The headline seasonally adjusted Construction Total Activity Index posted 48.4 in December, up from 46.7 in November. A reading below 50 indicates contraction, so while activity continued to shrink, the pace of decline was the slowest since June 2025.
AIB noted that while overall construction output fell, other indicators pointed to a more positive outlook for the sector. New orders returned to growth in December for the first time in five months, driven by improving client demand. Companies responded by expanding staffing levels, purchasing activity, and the use of sub-contractors, though the latter contributed to tighter availability in the market.
Some panellists attributed the earlier fall in activity to project start dates being delayed. At the same time, others reported that stronger customer demand prompted them to increase activity. These mixed trends helped stabilise the sector as the year ended.
Business confidence among construction firms also rose, reaching the highest level since January 2025. The PMI survey indicated that growing customer enquiries boosted optimism for 2026, encouraging firms to plan for expanded employment and procurement. Both staffing levels and purchasing activity increased in December for the second consecutive month, albeit at modest rates.
However, supply chain pressures remain a challenge. Companies reported difficulty sourcing materials, with input costs continuing to rise sharply. Although the pace of inflation eased from November’s eight-month high, it remained above the average for 2025 as a whole.
AIB Senior Economist John Fahey said the December PMI reading points to a “less severe pace of contraction heading into the New Year.” He noted that while activity remains broadly weak, the residential sector is performing best among the three sub-sectors, with the slowest rate of decline. Commercial activity contracted for a second month, while civil engineering remained the weakest segment.
“The new orders index, which is a leading indicator, expanded for the first time in five months,” Fahey said. “Improved demand and the scaling up of projects supported modest increases in employment, marking a positive signal for the sector in 2026.”
Overall, the latest survey suggests that while construction activity in Ireland is still contracting, the sector is beginning to stabilise, with new orders, rising confidence, and modest staffing expansions pointing to potential growth in the year ahead.
