Home-building activity in Ireland fell for the eighth straight month in December as all three sectors of the construction industry recorded a decline in activity.
The pace of the decline slowed in the final month of the year and a rise in new orders is lending optimism to the sector, as general business confidence hits its highest rate since January 2025, according to AIB’s purchasing managers’ index (PMI) for the Irish construction sector.
John Fahey, senior economist at AIB, said that while activity in the home-building sector had declined for the eighth month in a row, the pace of that “contraction was the mildest since May”.
At 48.4, the headline index figure recovered slightly on the 46.7 level recorded in November. Any figure greater than 50 indicates expansion of activity in the sector; a figure less than the break-even mark represents a contraction of activity.
READ MORE
The headline figure suggests the pace of contraction slowed in the month.
The lengthening slowdown in activity over recent months comes even as the Government scrambles to find ways of delivering an increasing number of homes to tackle the ongoing housing crisis.
Despite this, there are “encouraging signs for the sector”, Mr Fahey said, pointing to a leading indicator that tracks new orders.
For the first month in five, new orders returned to growth in December due to an increase in client demand. This spurred confidence within the sector, with construction firms increasingly confident in their outlook for the coming year. Optimism around business activity in the year ahead rose to an 11-month high.
Staffing levels and purchasing activity in December were bolstered by rising customer enquiries, new orders and firms’ optimistic outlook for 2026. The same confidence led to an uptick in the use of subcontractors.
[ ‘Down to the wire’: ECB’s digital euro project faces decisive vote in 2026Opens in new window ]
On a sectoral basis the residential sector was the strongest, despite home-building activity extending a steak of decline.
Commercial activity contracted for a second successive month, the survey indicated, while activity in the civil engineering sector remains the weakest of the three.
While other industries in the economy have seen input price inflation ease in recent months, the construction sector has continued to see inputs rise in cost.
While pulled back slightly from an eight-month high in November, input prices continue to advance for firms in materials such as aluminium, copper and steel. The rate of inflation remains higher than the running average for the year.
In addition to costs rising, firms also bemoaned delays in getting materials and delivery times lengthened, noting stock shortages at suppliers as a contributing factor.
