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Tue August 04 2020

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German construction returns to growth

7 Nov 14 Increases in housing and commercial activity helped Germany’s construction output return to growth at the start of the fourth quarter.

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Despite falling new orders, companies increased their workforce numbers. Suppliers’ delivery times lengthened only marginally and input cost inflation was the second-lowest in nearly five years. Meanwhile, sentiment remained subdued, but improved on last month’s 21-month low.

October data signalled a return to growth in German construction output, as highlighted by the seasonally adjusted Purchasing Managers’ Index (PMI). The results are based on asking respondents to report on the actual change in their total construction activity compared to one month ago; the figures rose from September’s 50.0 to a seven-month high of 51.5.

Work on residential building projects returned to growth in October, having fallen slightly in the previous month. Moreover, the pace of expansion was the fastest since March. Meanwhile, commercial activity rose for a second month running and the rate of growth accelerated to a seven-month high. Out of the three broad categories of construction activity, commercial activity rose at the strongest rate.

In contrast to increases in housing and commercial activity, work in civil engineering declined for the seventh month running October. That said, the rate of contraction eased slightly since September and was the weakest since April.

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German construction companies reported a further fall in new business in October, but the rate of contraction eased markedly and was the weakest in a year.

Despite a further decline in new business placed with German constructors, companies were encouraged to take on additional workers, thereby ending a four-month sequence of job shedding. The rate of job creation was, however, marginal overall.

Oliver Kolodseike, economist at Markit said: “The negatives in October ’ s data, however, lie in a further drop in the amount of new work placed with German construction firms and a relatively dark outlook with regards to future activity, which companies attributed to a general economic slowdown and low demand.”

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MPU
MPU

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