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Wed January 20 2021

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Eurozone contractors pessimistic as work falls again

4 Dec 20 Construction activity in the eurozone continued to fall in November and the decline in new orders quickened.

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Businesses in France and Germany remain pessimistic about future activity according to the latest figures from the IHS Markit Eurozone Construction Purchasing Managers’ Index (PMI), though those in Italy are more optimistic.

Usamah Bhatti, economist at IHS Markit, said: "The eurozone construction sector continued to report a decline in activity during November, accompanied by a quicker fall in new orders, as steep contractions in France and Germany weighed on the region’s performance. Businesses in the bloc also lowered staffing levels for the ninth month in a row although the rate of job shedding eased in the latest survey period.

“Moreover, construction firms based in the bloc remained strongly pessimistic regarding the outlook for activity over the coming 12 months, as a resurgence of coronavirus disease 2019 (Covid-19) infections led to the introduction of tighter restrictions on the three monitored economies. This was exacerbated by concerns over the lack of projects coming to tender over the coming months, which did little to allay concerns that the downturn in activity would continue into 2021. All three monitored sub-sectors saw falls in activity, with commercial construction contracting at the fastest pace, while civil engineering work was also subdued. Home building activity saw reductions although at a less severe rate compared to October."

Work undertaken on housing by eurozone construction firms decreased further in November. The decline marked the ninth consecutive monthly fall in activity, although the pace of contraction eased from that seen in October, and was only marginal overall. A faster rise in German home-building activity was offset by a further steep decline in France, while the fall in Italy was only marginal.

Meanwhile, commercial construction was the worst performing of the monitored sub-sectors. The pace of the contraction accelerated and was the fastest for six months. All three monitored regions recorded a fall in activity, the sharpest being registered in France.

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The downturn in eurozone civil engineering activity continued in November, the sixteenth fall in as many months, as infrastructure building contracted sharply. Rates of decline remained marked in both France and Germany. Italian civil engineering work was broadly unchanged, however.

November data pointed to declines in activity across all three of the largest economies in the eurozone. The overall contraction in the eurozone was led by a marked decline in France as well as a strong fall in Germany. Meanwhile, output in Italy fell only fractionally in November.

New business received by eurozone construction companies continued to fall in November. Moreover, the pace of the reduction accelerated and was the fastest since May. Anecdotal evidence suggested that the contraction stemmed from reluctance among many clients towards new investments, alongside fewer public projects coming to tender across the region. French construction firms recorded a substantial fall in inflows of new work, registering the fastest decline since May. Meanwhile, German businesses saw a sharp, although slightly softer fall in demand. However, firms in Italy indicated an increase for the sixth consecutive month.

Employment levels among eurozone constructors contracted further in the latest survey period. That said, the pace of job shedding eased and was marginal overall. At the national level, workforce numbers in France and Italy only declined at a marginal rate, while German firms signalled a modest fall in staffing levels.

Eurozone construction companies remained pessimistic regarding the outlook for activity over the coming year. On balance, firms in France and Germany expect activity to fall, with the latter the most downbeat in November. Conversely, Italian builders registered solid optimism regarding the outlook for output over the next 12 months, however, the degree of confidence softened significantly from that seen in October.

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MPU

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