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Sat September 19 2020

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Eurozone construction activity expands at faster pace

5 Mar The eurozone has experienced its fastest expansion in construction activity expansion for a year, supported by increases in worker numbers and purchasing.

February’s IHS Markit Eurozone Construction Purchasing Managers’ Index (PMI) rose to 52.5 from January’s figure of 51.9. Readings above 50 indicate growth.

Moreover, firms were their most optimistic towards the business outlook since last June. However, positive results came amid a softer expansion in new orders.

"The eurozone construction sector delivered mixed results in February as faster activity growth was accompanied by signs of a slowdown in demand,” said Eliot Kerr, economist at IHS Markit, which compiles the survey. “Despite activity rising at the quickest rate for a year, new business growth decelerated to the slowest in the current five-month sequence of expansion. Such a reading indicates softening underlying demand and can act as a prelude to slower activity growth. That said, firms were confident enough to continue taking on additional staff and buying extra materials, and forecasts for future activity remained strong."

The latest rise in activity was the quickest for a year, underpinned by accelerated growth in Germany and a slight rebound in Italy. On the other hand, France recorded a slower increase for the second month in a row, with the latest expansion only fractional overall.

At the sub-sector level, overall growth was supported by home building and commercial construction projects which both increased at quicker rates compared to January. Meanwhile, although civil engineering work continued to decline, the pace of reduction was the slowest in the current seven-month sequence of contraction.

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The rate of job creation accelerated to the quickest for almost a year. Across the euro area's three largest economies, employment growth was quickest in Germany.

Faster activity growth across the eurozone construction sector came despite a softer rise in new business during February. The latest rise was only marginal overall and the slowest since a decline last September. Decelerated growth in Germany and a modest reduction in France weighed on the overall expansion.

On the cost front, input prices faced by eurozone construction firms continued to rise in February. Moreover, the rate of inflation accelerated to the fastest in nearly a year and was historically marked.

Suppliers' delivery times in the eurozone construction sector continued to lengthen in February, extending the current run that began in September 2012.

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