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Mon May 10 2021

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German construction grows at record pace

8 Sep 17 Germany has experienced its fastest rise in new construction work since the Purchasing Managers’ Index (PMI) survey began in September 1999.

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The survey data from IHS Markit showed that growth was broad-based across residential, commercial and civil engineering, although the overall rate of expansion was the weakest since April.

Construction employment increased at the sharpest rate for a year-and-a-half, and usage of subcontractors rose markedly. Inflation of subcontractor rates remained close to June’s record high, while prices for construction inputs increased at the sharpest rate in nearly five-and-a-half years.

Adjusted for seasonal factors, the headline PMI – which is based on a single question asking respondents to report on the actual change in their total construction activity compared to one month ago – remained well above the 50.0 ‘no-change’ level in August, indicating strong growth.

 The PMI posted 54.9, down from 55.8 in July, indicating the softest rate of growth since April but one that remained strong in the context of historic survey data. Activity has increased continuously for a record 31 months.

 The three monitored areas of the construction sector all registered higher activity in August. The commercial sector continued to see the sharpest rate of growth, although all three segments saw weaker increases than in July.

The volume of new orders received by German construction firms rose at the fastest rate in the survey history in August. This extended the current sequence of growth to 10 months.

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Employment at construction firms increased further to support rising workloads. Jobs increased for the 26th consecutive month, and the rate of expansion accelerated to the strongest since February 2016.

Usage of subcontractors also rose markedly in August, and at the second-fastest rate in over six years. Supply of subcontractors remained under pressure and as a result their charges increased at the second-fastest rate on record.

Purchasing activity increased at the fastest rate since February 2016. This generated further pressure on supply chains, with average input delivery times lengthening to the greatest extent since December 2006. Input prices paid by construction firms continued to rise sharply, and the rate of inflation strengthened to a 65-month high.

Trevor Balchin, director, economics at IHS Markit, said: “The German construction boom showed little sign of easing in August, as new orders increased at the fastest rate on record. Overall activity continued to grow strongly, despite a slight weakening of momentum since July.

Survey indicators continued to signal capacity pressures, with suppliers’ delivery times lengthening by the most since December 2006 and the availability of subcontractors declining sharply. Rates charged by sub-contractors increased at the second-fastest pace on record and construction input price inflation accelerated to the strongest in nearly five-and-a-half years.”

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