Construction activity returns to growth in February

The residential sector saw growth for the first time in 10 months

The expansion in the housing sector comes after 2025 saw a 20.4% increase in housing completions to 36,284, which still falls short of the revised 2025 target of 41,000 homes, agreed in November 2024. File picture

The construction sector recorded its first expansion in activity last month since April of last year with commercial building remaining strong and the residential sector returning to growth, the latest AIB Purchasing Managers Index (PMI) shows.

The sector's PMI for the month showed a reading of 52.1, up from a 48.6 recorded in January. Any number above 50 in the PMI denotes growth in the sector.

“The modest expansion in activity midway through the opening quarter of the year ended a nine-month sequence of contraction,” the PMI said.

The expansion in activity was recorded amid continued improvements in demand conditions. “With workloads rising, firms took on extra staff and purchased additional inputs,” the PMI said.

Senior economist at AIB John Fahey said growth last month was driven by two of the three sub-sectors.

“The best performing of the three was commercial activity. It registered its first expansion in four months and at its highest level since the end of the first quarter of 2025,” he said. 

"Meanwhile, the residential sector returned to growth for the first time in 10 months, albeit the pace of expansion was marginal."

The expansion in the housing sector comes after 2025 saw a 20.4% increase in housing completions to 36,284.

However, the total still falls short of the revised 2025 target of 41,000 homes, agreed in November 2024. At the time, the Government said 41,000 homes would be completed in 2025, with output set to rise incrementally to 60,000 homes.

However, the civil engineering sub-sector saw a contraction during February albeit to the least extent in the current 10-month sequence of decline.

Encouraging signs

There were a number of encouraging signs for the sector during the month.

The PMI said that anecdotal evidence from the survey indicated that the rise in construction activity was in response to improving demand conditions.

“The new orders index, which is viewed as a leading indicator, posted its third successive month of expansion, with the pace of increase at its fastest in four years,” Mr Fahey said.

“Against the backdrop of expanding activity levels and an improving pipeline of projects, construction firms increased their staffing levels for the fourth month in-a-row.” 

The current sequence of jobs growth has extended to four months with the latest increase the most marked since January 2025.

However, firms also experienced rising input costs with input buying at its strongest in almost four years.

Sub-contractor usage was also up, the third month running in which this has been the case. 

Meanwhile, their availability fell to the largest extent since May last year.

“Construction firms continued to face sharply rising input costs, with panellists reporting higher metals prices in particular. The rate of inflation remained elevated despite easing slightly from that seen in January,” the PMI said.

Construction sector optimism

While input buying is up, suppliers' delivery times continue to lengthen, with delays linked to factors including shortages of couriers and Dublin port congestion.

Irish construction firms continue to be optimistic about the prospect of increasing activity levels over the coming 12 months.

“Expectations of further increases in new orders supported ongoing confidence in the year-ahead outlook for construction activity. 

"Companies remained strongly optimistic, albeit slightly less so than was the case at the start of the year,” the PMI said.