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Sun July 21 2019

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Germany’s construction activity holds steady

5 Jul Activity across Germany's construction sector has failed to rise for the first time in eight months, according to the latest Purchasing Managers’ Index (PMI) survey.

Only commercial work increased as firms noted modest declines in housing and civil engineering activity.

However, expectations about future output remained positive and firms continued raise both employment and purchasing activity.

On the cost front, rates of increase in both purchase prices and subcontractor charges ticked up for the first time in five months, but nonetheless remained among the lowest seen over the past two-and-a-half years.

The headline seasonally adjusted IHS Markit Germany Construction PMI - a measure of month-on-month changes in total industry activity – registered in line with the neutral 50.0 no-change mark in June, down from 51.4 in May and its lowest reading since October last year.

The index has fallen for three months in a row, signalling a sustained loss of momentum in the construction sector since growth peaked at a 14-month high in March.

The stagnation in total activity in June partly reflected renewed weakness in house-building. This construction category had been the best-performing in each of the previous four months but recorded a contraction for the first time since last October.

Commercial was the only area to see growth, with activity rising (albeit moderately) for the fifth month in a row.

Work on civil engineering projects meanwhile decreased for a third straight month, but at a  slower rate than in May.

"The latest figures show that the construction sector has lost all of its growth momentum, with the PMI slipping for the third month in a row in June to register in line with the 50 'no change' mark,” said Phil Smith, principal economist at IHS Markit, which compiles the survey. “Only commercial activity increased, with the previously strong housing activity component having its first setback in eight months.

"Total activity has plateaued after a solid opening quarter, when unusually mild weather helped to boost the level of construction work and new orders. The past two months have also seen a correction in new work as firms report already high workloads and constrained business capacity.

"However, constructors remain in hiring mode and continue to scale up their purchasing activity, which reflects the still generally positive outlook for the sector. Firms foresee a continued appetite for new building projects over the coming 12 months, supported by the low interest rate environment."”

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