AIB Ireland Construction PMI®: Growth of Activity at Three-Month Low in September

Key points:

• Total activity rises only marginally amid drop in housing output
• New orders increase for third month running
• Employment falls for first time in almost a year

The latest AIB Ireland Construction PMI® survey painted a mixed picture of conditions in the Irish construction sector at the end of the third quarter of the year. Total construction activity rose marginally amid increases in new orders, but the overall rise was recorded despite a further solid fall in housing activity. Meanwhile, employment decreased for the first time in 11 months. Firms continued to face lengthening suppliers’ delivery times, while the pace of cost inflation hit a three-month high.

The headline seasonally adjusted AIB Ireland Construction Total Activity Index posted 50.4 in September, down from 50.7 in August but still just above the 50.0 no-change mark to signal a slight monthly expansion in output in the sector. Total activity has now increased in three successive months, with the latest rise generally linked by panel members to demand improvements.

The rise in total activity was limited by a further solid fall in work on residential projects in September. Housing activity decreased for the second month running, and at a solid pace. More positively, civil engineering activity returned to growth, while work on commercial projects expanded for the third consecutive month.

As well as supporting growth of activity, stronger demand conditions also contributed to a third successive monthly increase in new orders in September. The rate of expansion was only slight, however, and softer than seen in August.

With new projects getting underway and an associated increase in output requirements, constructors raised their purchasing activity marginally again in September. On the other hand, employment decreased, thereby ending a 10-month sequence of job creation.

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Where companies bought inputs, they faced further delivery delays and increasing costs. The pace of input price inflation quickened to a three-month high amid reports of higher costs for fuel and transportation. Meanwhile, a shortage of delivery drivers and lack of stock at suppliers caused a further marked lengthening of lead times.

Although the usage of sub-contractors increased for the tenth successive month in September, the rate of growth was the slowest in this sequence and only marginal. Meanwhile, the availability of sub-contractors fell to the greatest extent since February.

Confidence that new orders will continue to rise in the months ahead supported optimism in the 12-month outlook for construction activity. More than 29% of respondents predicted an increase in output, but 14% were pessimistic. The level of optimism dipped from the six-month high posted in August.

Commenting on the survey results, John Fahey, AIB Senior Economist, said, “The AIB Irish Construction PMI survey for September showed that the sector registered a third consecutive month of growth – the longest growth streak since early 2022. However, the headline index eased to 50.4 from 50.7 in August, signalling a muted pace of growth throughout Q3 2026.

“Looking at the sectoral breakdown, the expansion in activity levels remained somewhat imbalanced. Commercial activity retained its position as the top performer, slightly ahead of the Civil Engineering sector, which also registered solid growth. However, the residential sector remained in contraction territory and has now seen falls in six of the first nine of months of 2026.

“At the same time, the construction sector saw a fall in staffing levels, with employment numbers dipping in September following a sustained period of growth over the past year. Price pressures remained a key challenge for the construction sector, with the rate of increase in input costs accelerating further, largely reflecting higher fuel prices.

“Nevertheless, some of the other key metrics in the September survey provided some encouraging signs. The new orders index, which is viewed as a leading indicator, increased for the third month in a row, and purchasing of inputs continued to grow robustly in September. Meanwhile, construction firms’ level of confidence in the prospect of higher activity levels over the coming 12 months remained resilient. Positive sentiment was underpinned by rising new orders and a healthy pipeline of new projects.”

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