Irish construction activity stabilises as new orders return to growth at end of 2025
AIB Construction PMI shows easing contraction, rising confidence and early signals of recovery for residential and commercial development
Thursday 8th January | 📧 editor@irishrealestate.news
Construction activity in Ireland remained in contraction at the end of 2025, but the pace of decline slowed materially, with new orders returning to growth for the first time in five months, according to the latest AIB Ireland Construction PMI from S&P Global.
The headline AIB Ireland Construction Total Activity Index rose to 48.4 in December, up from 46.7 in November. While still below the 50 threshold that separates growth from contraction, the reading marked the weakest fall in activity since June 2025 and the eighth consecutive month of declining output.
From an investor perspective, the most significant shift was in demand conditions. New orders increased in December following four months of decline, with survey respondents citing improving client demand and a scaling up of projects. The new orders index is regarded as a leading indicator for future activity, suggesting a potential stabilisation in development pipelines entering 2026.
Activity declined across all three sub-sectors covered by the survey, though rates of contraction eased in each case. Residential construction was the strongest performer, recording its mildest decline in seven months. Commercial construction contracted for a second consecutive month, while civil engineering remained the weakest segment, continuing to experience the sharpest fall in activity.
Improving demand conditions fed through to labour and procurement decisions. Construction firms expanded employment and purchasing activity for a second month running, albeit at modest rates. Usage of sub-contractors also increased for the first time in six months, contributing to reduced sub-contractor availability and upward pressure on rates.
Cost pressures remained a constraint on delivery. Input prices rose again in December, driven by higher costs for key materials including steel, aluminium and copper. Although input cost inflation eased from November’s eight-month high, it remained above the 2025 average. Supplier delivery times lengthened further, reflecting ongoing material shortages and logistics delays.
Business sentiment strengthened notably. Confidence among construction firms regarding activity over the next 12 months rose to its highest level since January 2025, supported by increased customer enquiries and improved order books. This uplift in sentiment points to cautiously improving conditions for residential and commercial investment as 2026 begins, albeit against a backdrop of continued cost inflation and capacity constraints.
