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German construction sector loses jobs as expansion slows

8 Jan 15 German construction output continued to rise at the end of 2014 but the rate of expansion was marginal and companies lowered their employment levels for the first time in three months.

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The rate of job shedding was the sharpest in 21 months.

December’s data signalled a third successive monthly rise in total construction output, as highlighted by the seasonally adjusted Markit Germany Construction Purchasing Managers’ Index (PMI). The result is based on a single question asking respondents to report on the actual change in their total construction activity compared to one month ago, with a figure of 50 representing the no-change mark. The latest index reading of 50.5 was down from 53.5 in November and so was indicative of a slowing in the rate of activity growth.

Oliver Kolodseike, economist at Markit said: “Germany’s construction PMI remained in expansion territory at the end of the year, but the rate of activity growth slowed to only a marginal pace. The expansion in construction output was solely driven by a rise in housing activity, while work on commercial and civil engineering building projects declined. Furthermore, falling employment levels and a pessimistic outlook for the year ahead suggest that we’re unlikely to see any meaningful and sustainable upturn in construction output in the near-term.”

Survey data showed that the increase in total construction output was largely attributed to a further rise in housing activity. Work on residential building projects rose for the third month running, albeit at a weaker rate than in November. Meanwhile, commercial activity declined for the first time since August and civil engineering output also fell since the previous month. Both rates of contraction were modest.

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As has been the case since April 2012, the amount of new work placed with German constructors declined in December. The rate of contraction accelerated since the previous month, but was weaker than signalled by the average for this sequence. Meanwhile, companies reported that their purchasing activity was unchanged since November.

Vendor performance in Germany’s construction sector deteriorated for the third month running in December. Moreover, the rate at which suppliers’ delivery times lengthened was the most marked since June.

Following the trend observed since August 2009, input prices faced by German construction companies increased further in December. The rate of cost inflation reached a three-month high, but remained weak in the context of historical data.

German construction companies expect activity at their units to contract over the course of the next 12 months. The level of pessimism was less marked than in November, but nevertheless high by historical standards.

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