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Activity across Ireland’s construction sector declined again in December, marking the eighth consecutive month of contraction, according to the latest Purchasing Managers’ Index from AIB. The survey shows that output fell across all major segments of the industry, including residential, commercial and civil engineering, though the pace of decline eased in each area.

The headline Construction Total Activity Index remained below the 50 threshold that separates growth from contraction, signalling an overall reduction in output as the year came to a close. The index rose to 48.4 in December from 46.7 in November, indicating the slowest rate of decline since mid-2025. Residential construction recorded the mildest slowdown, with the softest fall in activity for seven months.

While overall activity continued to fall, the survey highlighted a more encouraging trend beneath the surface. New orders increased for the first time in five months, suggesting an improvement in underlying demand. In response, construction firms reported increases in employment, purchasing activity and the use of sub-contractors. Some respondents pointed to delayed project start dates as a drag on activity, while others noted stronger client enquiries towards the end of the year.

Business confidence also strengthened, reaching its highest level since January of the previous year. Firms reported growing optimism that activity will improve during 2026, supported by rising customer enquiries and a healthier pipeline of work. This more positive outlook contributed to a second consecutive month of growth in staffing levels and purchasing, alongside renewed demand for sub-contractors, which further tightened availability.

Cost pressures remain a concern for the sector. Companies continued to report difficulties sourcing materials, alongside a further sharp increase in input costs. Although inflationary pressures eased slightly compared with November, they remained elevated relative to the average levels seen during 2025.

Commenting on the findings, AIB Senior Economist John Fahey said the December figures point to a less severe rate of contraction heading into the new year. He noted that while activity remained weak across all subsectors, residential construction performed best, with the slowest decline since late spring. Commercial construction fell for a second month, while civil engineering remained the weakest area.

The return to growth in new orders is viewed as a particularly important signal for the months ahead. As a forward-looking indicator, it suggests that demand conditions may be starting to improve, providing a tentative foundation for recovery as 2026 approaches.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.