Housing construction shrinks as broader building industry sees ‘slight expansion’

The volume of construction across the State registered “only a slight expansion” last month from the previous month, as the housing sector in particular “decreased solidly” from July to August, according to findings from an AIB survey.

Growth of employment in the industry “eased to a 10-month low” as companies faced “intensifying” delays throughout their supply chains and “a sharper rise” in input costs.

AIB’s construction purchasing managers’ index (PMI) records and analyses the month-on-month changes in the volume of construction undertaken nationally based on findings from a survey of about 150 firms across the State.

A reading above 50 on the index represents growth in the sector from the previous month. August’s figure was recorded at 50.7, a decrease from July’s result of 53.0, “indicating that the pace of growth slowed midway through the third quarter” of the year, according to John Fahy, a senior economist at AIB.

Only one sector within the construction industry monitored by the PMI saw growth last month, with commercial activities recording a 51.4 result on the index. Fahy said it has “retained its position as the top performer” in the industry.

Civil engineering projects, which includes State-sponsored infrastructure works on water supplies, electricity grids, road networks and public housing, dipped slightly below a growth-rating, registering 49.9 on the index.

Housing activity fell far below the no-change benchmark with a result of 46.9. Fahy said “the residential sector was unable to maintain its momentum from July, falling back into contraction territory last month”. Meanwhile, civil engineering activity levels were broadly unchanged in August.

AIB noted that firms’ “optimism hit a six-month high” last month. The new orders index, “viewed as a leading indicator”, according to Fahy, increased for the second month in a row, “with the pace of growth accelerating”.

He added staffing levels across the construction industry continued to increase for a 10th successive month, albeit at “a marginal rate that was the slowest” since November 2025.

AIB credited constructors increasing their employment and purchasing activity last month to rising workloads and the start of new projects.

“Companies registered a further marked rise in input costs,” the bank said, “with oil and metals mentioned in particular as having increased in price during the month”.

“The rate of inflation ticked up from July, but was still much weaker than April’s recent peak,” it continued, after the closure of the Strait of Hormuz sent global oil prices and inflation indices soaring recently.

Fahy concluded that “construction firms’ level of confidence in the prospect of higher activity levels over the coming 12 months strengthened for a fourth consecutive month in August”.

“The improvement in sentiment was underpinned by rising new orders and a healthy pipeline of projects,” he added.