Overall, growth of construction activity ground to a halt in July, with the renewed downturn in civil engineering work coinciding with slower expansions in both commercial and housing activity.
New orders rose on the month, albeit only marginally.
Capacity continued to act as a constraining factor: the latest rise in employment in the sector was the slowest seen for 1.5 years, while subcontractor availability showed a further steep decline. Elsewhere, a combination of new road tolls and higher demand for building materials resulted in a further sharp increase in purchase prices faced by construction companies.
The headline seasonally adjusted Germany Construction Purchasing Managers’ Index (PMI) registered in line with the 50.0 ‘no-change’ mark in July, down from 53.0 in June. The latest figure was the lowest seen for four months and below the average recorded over the first half of the year (52.9).
The worst-performing area of the industry, however, remained civil engineering, which returned to contraction after a brief pick-up in June.
Though reports from panellists signalled demand for new projects from clients, capacity constraints in the sector remained evident and the level of new orders received was up only marginally from the previous month.
Constructors continued to take on new staff during July, but the rate of job creation was well below the highs seen around the turn of the year and the lowest overall since January 2017.
Latest survey data also showed a sharp drop in the availability of sub-contractors. Capacity pressures in the sector were also reflected in a further marked lengthening of supplier delivery times, which increased on average to the greatest extent since November last year.
Higher demand for building materials meanwhile continued to help drive up the average price of purchases faced by constructors.
Phil Smith, principal economist at IHS Markit said: “Encouragingly, order books did return to growth in July and anecdotal evidence suggests that demand isn’t necessarily the issue, but rather constraints in terms of capacity.
“Constructors continue to look to boost employment numbers; however, an ever-tightening labour marked has seen the pace of hiring drop off in recent months and the availability of subcontractors also continues to worsen. Supply chains are meanwhile struggling under the pressure from higher demand for building materials and components, with constructors noting the worst delivery delays for eight months in July.”