New orders also plummeted as demand was hit and employment shrank at a record rate.
The IHS Markit Eurozone Construction Purchasing Managers’ Index (PMI) is compiled from responses to questionnaires sent to purchasing managers in a panel of around 650 construction firms in the eurozone. The headline figure is the Total Activity Index, which tracks changes in the total volume of construction activity compared with one month previously.
April’s figure of 15.1 was a new record low and came after a substantial drop in March, when the figure had fallen to 33.5. Survey data showed Italy and France recorded extreme contractions in construction output, while Germany registered a far slower decline but one that was still marked overall.
Bernard Aw, principal economist at IHS Markit, said: "Stricter measures to halt the spread of the Covid-19 pandemic placed restrictions on business operations, dealing a substantial blow to eurozone construction firms in April. Construction output across the euro area slumped in April, following a severe drop in March, with Italy and France especially hard hit amid reports of widespread work suspensions among construction firms.
"Demand was also severely aﬀected by the lockdown measures, with new orders falling at the sharpest rate seen in over 20 years of data collection. In response, firms made deep cuts to their workforce numbers and purchasing activity. Business sentiment remained negative in April, with the Covid-19 crisis the predominant concern among eurozone construction firms.”
April data showed a substantial fall in home building activity across the eurozone following a marked decline in March. The rate of contraction was the fastest seen in the over 20-year survey history, led by France and Italy, which reported extreme rates of decline.
Work undertaken on commercial construction projects in the eurozone likewise contracted at a severe pace in April, as indicated by the respective seasonally adjusted index registering significantly below the no-change 50.0 level. The rate of decline was unprecedented in over 20 years of data collection. The sharpest contraction was recorded in Italy, with France not far behind, while Germany registered a comparatively slower decline, though one that was still severe overall.
Meanwhile, eurozone civil engineering activity fell further in April, extending the current sequence of contractions to nine months. National data revealed a collapse of civil engineering in France, with Italy also recording an extreme decline.
The decline in construction output deepened across eurozone's three largest economies, with Italy and France recording substantial drops in activity during April. Germany registered a comparatively slower decline, but nonetheless one that was still severe overall.
Supply chains remained under pressure despite the substantially reduced purchasing demand. Delivery times lengthened to the greatest extent in the series history and at a rate that was severe overall. Firms highlighted transport issues, customs restrictions and supply shortages at distributors as key factors for delivery delays. Each of the bloc's three biggest economies reported much slower deliveries, with France recording the most severe delays.
Cost burdens faced by eurozone construction firms rose further in April. However, the rate of inflation was the slowest for just over four years.
Eurozone building companies remained pessimistic about future activity, with the Future Activity Index coming in well below the neutral 50.0 level. Concerns over the economic impact of the Covid-19 pandemic on construction activity were commonly mentioned. Of the currency area's three largest economies, Germany had the most negative outlook over the next 12 months, followed by France.
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