January’s IHS Markit Eurozone Construction Purchasing Managers’ Index (PMI) data painted a brighter picture of the Eurozone construction sector, with a quicker rise in new work intakes underpinning faster increases in activity, input buying and employment.
Eurozone builders were upbeat towards growth prospects, following a neutral outlook at the end of 2019. The degree of optimism was strong by historical standards and was at a six-month high.
The IHS Markit Eurozone Construction PMI rose from 51.3 in December to 51.9 in January, to signal the strongest rate of expansion in output since April 2019. Growth of residential and commercial work accelerated to nine- and four-month highs respectively, but civil engineering activity continued to decline.
Eurozone builders recorded a fourth successive rise in new work, with the pace of growth the fastest in almost a year.
"The eurozone construction sector took a further step forward in January, with another pick-up in new order growth underpinning the strongest expansion in activity for nine months,” said Pollyanna De Lima, principal economist at IHS Markit, which compiles the survey. “While home building remained the brightest spot, it was encouraging to see growth of commercial work gathering momentum too. At the other side of the scale, however, was a further solid drop in infrastructure activity.
"Another positive takeaway was an improvement in business confidence, which supported sharper increases in employment, sub-contractor usage and input buying. All of these developments combined suggest that the construction sector looks set to enjoy further growth in the near-term.
De Lima added that the headline figures for the eurozone mask divergences at the country level. “Germany performed notably well, leading the upturns in construction activity, new orders and purchasing,” she said. Modest growth was noted in France for all of the aforementioned measures, but Italy continued to register contractions."
In response to rising workloads, Eurozone constructors continued to add to their workforces. Payroll numbers have increased in each month over the past three years, with the upturn noted in January the strongest since last March. Job creation accelerated in Germany and eased in France, while employment stabilised across Italy.
Input buying rose at a solid pace that was the quickest since last April. In turn, stronger demand exerted upward pressure on prices, with the rate of inflation climbing to a seven-month high. Subcontractor rates also increased, at the fastest rate since April 2019.
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