Irish house building activity shrank for the third month in a row in July and construction companies reported a sharp dip in confidence levels as customers delayed project decisions, a new report from AIB indicates.
The bank’s latest purchasing managers’ index (PMI) for the construction sector suggests that the sluggishness observed in the first half of 2025 has continued into the second.
Of the three main subsectors covered by the report, which is based on a survey of roughly 150 firms, only the commercial construction sector reported a modest expansion of activity levels last month.
Housing and civil engineering saw “marked reductions” in business levels, according to the report.
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The July headline index remained below the neutral 50 threshold – which separates growth in activity from contraction – dropping from 48.6 in June, to 47.1 in the month.
It means construction firms saw their activity levels contract for a third month in a row and at a faster pace than in June. The decline was the “most pronounced” in a year and a half, AIB said.
That comes as the Government scrambles to find ways of delivering an ever increasing number of homes to tackle the ongoing housing crisis.
“The AIB Irish construction PMI survey for July showed that the subdued performance evident over the May-June period has carried over into the start of the third quarter,” said John Fahey, senior economist at AIB.
“Looking at the sectoral breakdown, commercial activity retained its position as the top performer and was once again the only sector that recorded growth in the month. On the other hand, residential construction activity contracted for a third consecutive month.”
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The data comes a day after it emerged the Government waslikely to extend the suspension of development levies this week in a move to increase house building of the year.
The temporary waiver of development contributions – levies charged by local authorities on new housing developments – was introduced last year but is due to lapse later this month.
After a period of decline last year, construction firms reported an increase in input prices in July, at a “marked and quickened pace from that seen in June”, according to the PMI report.
Construction material prices increased by 0.7 per cent in the 12 months to the end of June, according to the Central Statistics Office’s most recent wholesale price index, published last month.
While the survey results suggest a pickup in new orders overall in July – indicating an improvement in underlying demand – the rate of growth “was only slight” and the weakest since February, AIB said.
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Some survey respondents “indicated that customers had delayed decision making” during the period, according to the report, while others cited a “competitive pricing environment”.
“Panellists often mentioned that activity had fallen as work was put on hold amid delays in decision making,” AIB said.
Builders were also less optimistic about the next 12 months than they were in June. July saw confidence levels among construction firms fall to a 32-month low, AIB said, amid “uncertainty around US trade policy” and geopolitical conflict, which “dampened confidence”.
On a more positive note, Mr Fahey said that the growth in new orders last month was coupled with a reported increase in staffing levels among firms in the sector.
July “lengthened the current period of growth [in staffing] to five months, with the pace of increase representing an improvement versus June,” he said.
