Business conditions in the construction sector remained subdued at the end of the first half of 2025 as activity level decreased again and new orders, input buying and employment all rose modestly.

The latest AIB Ireland construction PMI returned a reading of 48.6 last month, down from 49.2 in May and below the 50.0 no-change mark, indicating that the industry contracted at an accelerated pace in June.

Work on housing (48.4) projects decreased for the second successive month and at the fastest pace for a year-and-a-half.

Civil engineering activity (41.0) also declined, leaving commercial (53.4) as the sole source of growth for the month, with activity in the sub-sector rising for the fifth month running and at the same pace recorded in May.

In contrast, residential construction activity contracted for a second successive month," said John Fahey, senior economist at AIB. "The pace of reduction was modest, but it did contract at a faster rate compared to May.

"Meanwhile, civil engineering was, once again, the weakest of the three sub-sectors, with activity contracting for the second month in-a-row also."

Panellists linked the fall in activity to economic uncertainty and muted demand, but some firms noted that they had secured new contracts. Indeed, new orders rose for the fifth consecutive month.

Employment increased at the slowest pace in the current four-month growth sequence as new staff were hired to help fulfil orders and work on future projects.

Companies remained optimistic that activity will increased over the coming year, reflecting expected improvements in demand, particularly related to housing, although concerns about economic and geopolitical issues persist. As a result, 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, but all rates of expansion eased month-on-month.

Inflationary pressures softened in June. Input costs continued to rise sharply, but the latest increase was the slowest since January, coming in broadly in line with the series average.

Meanwhile, the rates charged by sub-contractors rose at the weakest pace in four months. Finally, suppliers' delivery times lengthened further amid reports of staff shortages at vendors.