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Wed December 08 2021

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More gloom for German construction

4 Sep 14 The downturn in Germany’s construction industry continued in August, with declines in commercial and civil engineering activity set against only a slight rise in housing activity.

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Activity fell for a fifth consecutive month running, according to the latest Purchasing Managers’ Index (PMI) from Markit.

New orders continued to decline and companies were cautious about their employment numbers, resulting in further job cuts. Meanwhile, purchase prices increased at the weakest rate in nearly five years.

PMI results below the neutral 50.0 mark indicate a downturn. The figure for August was 47.7, down from 48.2 in July; the pace of contraction accelerated slightly.  

Oliver Kolodseike, economist at Markit said: “The only positive from otherwise disappointing data is a marginal expansion in work on residential building projects.”

The drop in construction activity was largely driven by declines in commercial and civil engineering output. Work on commercial building projects returned to contraction, following a modest rise in July, while civil engineering activity fell at a marked rate. Out of the three broad categories of construction activity, only work on residential building projects expanded in August. The rate of growth eased since the previous month, however, and was marginal overall.

Following the trend observed since April 2012, German construction companies signalled a lack of incoming new work in August. Despite easing since July, the rate of contraction remained sharp, with more than one-in-four panellists reporting a decline. Some survey participants linked lower order intakes to missing planning permissions.

With activity and new work declining further, construction companies reduced both their purchasing activity and their staffing levels.

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