Construction activity dropped again in September, with the rate of decline recorded the fastest since December 2022 according to AIB, and work on housing projects decreasing for the fifth consecutive month, while a slight decrease in employment ended a six-month sequence of job creation.
AIB said its headline seasonally adjusted AIB Ireland Construction Total Activity Index dropped to 43.7 in September from 45.9 in August, below the 50.0 no-change mark for the fifth consecutive month and signalling a sharp monthly contraction in total activity.
The downturn in the Irish construction sector gathered pace at the end of the third quarter of 2025, the bank said. Sharper reductions in activity and new orders were recorded, while employment decreased for the first time in seven months.
Firms also scaled back their purchasing activity, while the rate of input cost inflation eased to the weakest since last November. Looking to the future, business sentiment ticked down and remained relatively muted.
In line with the picture for total construction activity, work on housing projects decreased for the fifth consecutive month during September. The latest fall was marked, albeit softer than that seen in August, AIB said, and the weakest of the three monitored categories which look at construction, manufacturing and business services.
Commenting on the survey results, John Fahey, AIB Senior Economist, said that the AIB Irish Construction PMI survey for September indicates a weak end to the third quarter for building activity, adding “the September reading is the lowest since December 2022.”
“The index has now been below the key breakeven level of 50 for five consecutive months,” he added. Me Fahey said that the weakness in activity remained “broad-based, with all three sub-sectors (residential construction, the commercial sector and civil engineering) recording a decline in activity, as was the case in August.
“Residential construction activity contracted for a fifth successive month, albeit at a marginally slower pace compared to the previous month. Meanwhile, the commercial sector remained in contraction territory for a second month running, with the pace of decline accelerating. Civil engineering continued to report the sharpest falls in activity, with the pace of contraction at its most pronounced since October 2022,” he said.
“The new orders category, which is viewed as a leading indicator, also paints a weak backdrop for the sector. This component contracted for a second consecutive month, with the rate of decline worsening. Not surprisingly, against this backdrop of falling activity levels, there was a reduction in employment in the sector, ending a six-month period of jobs growth. However, despite this challenging operating environment, firms retained an optimistic view that activity levels will increase over the coming 12 months.” he said.
Anecdotal evidence pointed to a wider economic slowdown and delays in decision making by customers, while some reports suggested that the ability of firms to secure new orders was also impacted by a competitive pricing environment. New orders decreased for the second month running in September. Although modest, the pace of decline was the fastest in just over a year-and-a-half, AIB said.
In line with the picture for new orders, employment decreased at the end of the third quarter. The slight fall in staffing levels ended a six-month sequence of job creation, the bank added.
“Purchasing activity was also scaled back, and at a solid pace. Despite the drop in demand for inputs, suppliers’ delivery times continued to lengthen amid reports of staff shortages at vendors and issues importing items. That said, the latest decline in supplier performance was slightly less marked than in August.”
“Where firms did purchase inputs, they were faced with a further sharp increase in costs. The pace of inflation eased to a ten-month low, however. Rates charged by sub-contractors also rose sharply, but at the weakest pace in three months. Sharper falls in total activity and new business Staffing levels down for first time in seven months.”
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