Ireland's construction sector showed tentative signs of stabilisation in October, with a sharp slowdown in its rate of decline and a surprise return to growth for commercial activity, the latest AIB Construction PMI® reveals.
The headline seasonally adjusted Total Activity Index rose markedly to 48.1 in October, up from 43.7 in September. While this marks the sixth consecutive month the index has remained below the 50.0 growth threshold, it signals the softest pace of contraction since June.
The most encouraging development was a clear divergence in the performance of sub-sectors. Commercial construction activity ended a two-month period of decline, returning to marginal growth and bucking the wider trend. Civil engineering also saw a less severe rate of contraction compared to September.
In stark contrast, residential construction activity decreased at its sharpest pace in two and a half years, highlighting the ongoing severe challenges in the housing segment.
Underpinning the improved headline figure was a near-stabilisation of new orders. The decline in new business was only marginal and the weakest in the current three-month sequence of falling demand, suggesting underlying conditions may be beginning to level out.
Despite this, continued pressure on workloads led companies to scale back staffing levels for the second month running, the first back-to-back reduction in employment since late 2022. Purchasing activity was also reduced for the fourth successive month.
In a potential headwind for future recovery, input cost inflation accelerated in October. Companies reported a sharp rise in expenses, driven predominantly by higher fuel and raw material costs.
Looking ahead, business optimism regarding the year-ahead outlook for activity levels improved to a four-month high. Approximately 29 percent of survey respondents anticipate an increase in output over the coming twelve months, with expected improvements in new orders cited as a key reason for confidence.
The data, compiled by S&P Global from a survey of approximately 150 construction companies, indicates that while the sector remains in contraction, the pace of the downturn eased significantly at the start of the final quarter.
