German civils work falls at record pace
February saw Germany experience its sharpest drop in activity since the weather-related drop two years ago.
Civil engineering activity fell at a record pace and employment as down for first time in 14 months according to the latest Germany Construction Purchasing Managers’ Index (PMI) figures produced by Markit Economics.
February’s heavy snowfall caused widespread disruption at German construction sites, with activity in each of the monitored sub-sectors falling sharply on the month. Lower output meant that staffing numbers were reduced on average for the first time since February 2010, when output was also affected by unusually harsh weather.
But expectations of a catch-up later in 2012 meant that business expectations in the sector improved to the highest for a year, despite a further marked fall in new orders.
The PMI is designed to provide a single-figure snapshot of overall activity in the construction economy. A reading of below 50.0 indicates that the economy is generally declining. The figure plummeted from 53.2 in January to 35.3, as a severe spell of cold weather postponed activity at a number of building sites. This was the sharpest decrease in total industry activity in two years, more than offsetting gains made in January.
All three monitored sub-sectors saw output levels fall sharply in February. In line with the overall trend, contractions in both residential construction and commercial building activity were the fastest for two years. The steepest month-on-month decline was in civil engineering work, which fell for the tenth survey period in a row, and at the steepest pace in the series history.
With bad weather delaying work across the sector, German construction companies reduced staffing numbers for the first time since December 2010. Reflecting the temporary nature of February’s cold snap, however, the overall decrease in employment was only modest.
Latest data showed a faster decrease in new orders placed at German constructors – the sharpest for two years. Anecdotal evidence suggested that this was partly attributable to a fall in contracts from local authorities, with bad weather also contributing to the contraction.
As well as seeing a further fall in incoming new orders, German constructors faced a rise in cost pressures in February. Increases in the prices of fuel and other oil-related products meant that input price inflation quickened to the fastest since last October. The quantity of materials purchased fell sharply on the month, ending a three-month period of growth. Mirroring the trend in output, the decrease in input buying was the steepest since February 2010.
Business expectations within the German construction sector picked up for the fourth month in succession to the highest in 12 months. Furthermore, with about 24% of businesses anticipating output levels to increase in the coming year, the overall degree of confidence was high in relation to the historical standard of the series.
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This article was published on 7 Mar 2012 (last updated on 7 Mar 2012).