Construction News

Mon November 18 2019

Related Information

Housing leads rebound in German construction

7 Nov The homebuilding sector led a rebound in Germany’s construction activity in October.

Total construction industry activity rose at its strongest pace for six months, with growth driven exclusively by an increase in homebuilding. However, there was ongoing weakness in both commercial and civil engineering activity, while expectations towards future output remained subdued.

October saw the headline seasonally adjusted IHS Markit Germany Construction Purchasing Managers’ Index (PMI®) – a measure of month-on-month changes in total industry activity – climb to 51.5, up from 50.1 in September, rebounding further from a five-year low in August. It signalled only a modest rate of growth overall even though it was the highest reading since April,.

The upturn in activity in October was driven exclusively by homebuilding, which rose for the second month in a row and at the fastest rate since April. By contrast, commercial activity recorded a further – and slightly accelerated – contraction to extend the current sequence of decline in this category to four months. The steepest drop in activity was again seen in the civil engineering sub-sector, which saw output fall for the seventh month in a row, albeit at the slowest rate since July.

The weakness in both commercial and civil engineering activity was partly attributable to a recent soft patch in new orders. Latest data showed construction order books decreasing for the sixth straight month, though the decline in October was only marginal and the weakest in this sequence.

Constructors' buying levels rose in line with the increase in activity in October, exhibiting the strongest growth in six months. Employment also increased, though only modestly as the pace of job creation moderated to a one-year low. At the same time, there was a renewed decline in the use of subcontractors, following the first - albeit only marginal -rise in usage for five months in September.

Latest data showed that constructors remained cautious about the outlook for activity. Expectations remained close to August's near four-year low, as surveyed businesses reporting ongoing concerns about the impact of a manufacturing slowdown on demand for new commercial building projects in the year ahead.

“Back-to-back increases in September and October mean the construction PMI has recovered from August's recent low and moved back into growth territory,” said Phil Smith, principal economist at IHS Markit, which compiles the survey. “The details of the survey, however, reveal that homebuilding is doing all the heavy lifting in terms of driving activity. Residential work has been the stand-out performer for most of 2019 so far, while the rest of the data for commercial and civil engineering activity remain pretty weak.

“Efforts among constructors to expand capacity continue to support employment growth – though much like in the service sector the rate of job creation has slowed markedly compared with earlier in the year. With much uncertainty around future developments in the manufacturing sector and business investment in general, it seems building firms are being more conservative in their hiring amid doubts about the number of new project starts in the coming months.”

Got a story? Email news@theconstructionindex.co.uk

MPU

Latest News

Click here to view more construction news »