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Sat November 27 2021

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Downturn in German construction intensifies

7 Jul 14 The downturn in Germany’s construction sector intensified further last month.

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Building activity declined across all of the three monitored categories, and at the sharpest rate in 15 months amid a steep fall in new orders. Meanwhile, companies reduced their workforce numbers for the first time since March last year.

The seasonally adjusted Purchasing Managers’ Index (PMI) – which is based on a single question asking respondents to report on the actual change in their total construction activity compared to one month ago – fell from May’s 48.1 to 45.5 in June. Anything below 50 signifies decline. The current sequence of contraction has now run for three months.

Oliver Kolodseike, economist at Markit, said: “June’s PMI data signal a broad-based decline in German construction activity, with the headline index falling to a 15-month low. New orders and purchasing activity continued to decrease, and companies cut workforce numbers for the first time in 15 months. The only bright spot in the survey results is a positive outlook for the year ahead, which companies generally linked to work in the pipeline.”

The decline in activity was broad-based with contraction reported across all three broad categories of construction activity monitored by this survey. Work on residential building projects fell for a third consecutive month, albeit only marginally. Meanwhile, commercial activity declined for the first time in 14 months and at a slightly steeper rate than housing activity.

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By far the sharpest drop in activity was seen in the civil engineering sub-sector, with the rate of contraction the fastest in over two years. Moreover, nearly one third of the survey panel reported a decline.

As has been the case since April 2012, new orders placed at German construction firms fell in June. The rate at which new business declined was the joint-highest in 15 months. In line with the trends for activity and new orders, German constructors lowered their purchasing activity in June. Input buying fell for the third month in a row and at the quickest pace since March 2013.

Employment at German construction companies also fell during June, ending a 14-month period of rising workforce numbers. However, the rate of job shedding was modest overall and weaker than the series average.

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MPU

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