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Optimism in German construction hits record high

7 Apr 17 There has been faster growth in Germany’s construction sector with optimism in the sector hitting a record high, according to latest figures from the Purchasing Managers’ Index (PMI).

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The latest figures show that there was improved performance in March, with the sharpest rise in activity in over a year. Moreover, new orders increased at the second-fastest rate on record and the 12-month outlook for the sector was the strongest in the survey history.

There were signs of inflationary pressures, however, as input price inflation hit a five-year high and subcontractor prices increased at one of the strongest rates since the survey began in 1999.

Adjusted for seasonal factors, the 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 – rose to 56.4 in March, from 54.1 in February.

IHS Markit senior economist Trevor Balchin said: “The German construction sector continued its revival in March, following a slowdown at the start of the year that partly reflected very cold weather. The overall rate of expansion was one of the fastest seen since the survey began in 1999, with all three subsectors of construction showing stronger growth.”

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Residential, commercial and civil engineering all registered stronger increases in activity, with housebuilding rising at the fastest rate.

He added: “Forward-looking indicators are signalling continued momentum. New orders increased at the second-fastest rate on record in March, and business expectations hit a new series high. Strengthening demand brought with it inflationary pressures, however. Average purchase prices rose at the fastest pace in five years, and subcontractors hiked their charges at a rate not seen since May 2008.”

Construction companies accommodated new work by expanding their workforces and usage of subcontractors in March. Employment in the sector increased at the strongest rate since February 2016, while work undertaken by subcontractors – as a percentage of all activity – increased at the fastest pace for a year. Meanwhile, the availability of subcontractors declined at the fastest rate for almost 10 years.

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