Construction sector records fastest activity decline in almost 18 months
According to the PMI, business conditions in the construction sector remained subdued in June with total activity decreasing slightly again, despite growth in commercial activity.
The Irish construction sector recorded a contraction in activity for the second month in a row during June as both housing and civil engineering work saw declines, the latest AIB Ireland Construction Purchasing Managers’ Index (PMI) shows.
According to the PMI, business conditions in the construction sector remained subdued in June with total activity decreasing slightly again, despite growth in commercial activity. Meanwhile, new orders, employment and input buying continued to rise but at modest rates.
The PMI reading for June stood at 48.6 - down from 49.2 in May. A reading of 50 would indicate no change in the sector while a reading below it represents a decline in activity.
“The rate of decline was modest, but the fastest in almost a year-and-a-half… In line with the picture for total construction activity, work on housing projects decreased for the second successive month in June,” the PMI said.
John Fahey, senior economist with AIB said the PMI indicated a “muted performance” for the sector heading into the second half of the year.Â
He said the June reading implies a “quicker pace of contraction in construction activity at the end of the second quarter”.
“Residential construction activity contracted for a second successive month. The pace of reduction was modest, but it did contract at a faster rate compared to May,” Mr Fahey said.
“Meanwhile, civil engineering was, once again, the weakest of the three sub-sectors, with activity contracting for the second month in a row also.”Â
The declines in the housing construction sector comes as both the Economic and Social Research Institute (ESRI) and Central Bank of Ireland revised downwards their expected home completions for this year.
The ESRI has previously suggested that up to 53,000 new homes a year could be needed by 2030 given the increasing population demands.
There were just under 6,000 new homes completed during the first quarter of the year - a slight increase of 2% compared to the same period in 2024.
Commercial construction activity was the only source of growth in the sector last month which increased for the fifth month running, and at the same solid pace as in May.
In the areas that saw a decline in activity, firms reported this was linked to economic uncertainty and muted demand conditions. On the other hand, some firms noted that new contracts had been secured.
New orders increased for the fifth consecutive month while employment also rose slightly in June but at the slowest pace in the current four-month sequence of job creation.
“According to respondents, new staff were hired in order to help fulfil orders and work on future projects,” the PMI said.
Input costs for the sector also increased during June but at the slowest pace in five months.
In its outlook, the PMI reported that firms in the construction sector were optimistic that activity will increase over the coming year particularly in the area of housing.
“That said, concerns around geopolitical issues and economic uncertainty meant that optimism eased to a three-month low. As well as raising employment, firms also expanded their purchasing activity and increased their usage of sub-contractors,” the PMI said.
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