The latest AIB Ireland Construction PMI® shows that Ireland’s construction sector returned to growth in May, with both total activity and new orders increasing. Growth was driven primarily by commercial construction, while stronger demand encouraged firms to expand employment and purchasing activity. However, rising fuel and oil costs continued to push up input prices, and supplier delivery times remained significantly extended.

The seasonally adjusted AIB Ireland Construction Total Activity Index rose to 50.2 in May from 47.1 in April, moving back above the 50.0 no-change threshold and signalling a marginal expansion in overall construction activity.

Commercial construction was the standout performer, recording its fastest rate of growth since March 2022. In contrast, both residential and civil engineering activity declined sharply, with housing work contracting for a second consecutive month and civil engineering remaining the weakest-performing sector.

Improved customer demand and increased workloads contributed to a renewed rise in new orders following April’s decline. In response, construction firms increased staffing levels for a seventh consecutive month while also raising purchasing activity, although the pace of input buying slowed to its weakest level since January.

Subcontractor usage also increased during May, but firms reported worsening subcontractor availability and the fastest rise in subcontractor rates since July 2022.

Input cost inflation remained elevated, with companies citing higher fuel and oil prices linked to the conflict in the Middle East as the primary driver. Although supplier delivery times continued to lengthen, the pace of deterioration eased slightly compared with April, with stock shortages frequently reported.

Despite ongoing cost pressures and supply chain challenges, firms remained cautiously optimistic about the year ahead. Expectations of stronger new orders supported improved business confidence from April’s 41-month low, although overall sentiment remained subdued. Some respondents suggested that an end to the conflict in the Middle East would help improve business conditions.

Commenting on the findings, AIB Senior Economist John Fahey said the May survey indicated that the sector had returned to modest growth after April’s contraction. He noted that commercial construction continued to outperform the other sub-sectors, while housing and civil engineering remained under pressure. Fahey also highlighted the renewed growth in new orders, continued hiring and purchasing activity, alongside persistent supply chain delays and elevated input costs driven by higher fuel and oil prices. While business confidence improved from April’s low, he said optimism across the sector remained relatively muted.