Companies often commented that growth was partially held back by concerns of accelerating prices and uncertainty stemming from the outbreak of war in Ukraine.
The findings came from the latest S&P Global Eurozone Construction Purchasing Managers’ Index (PMI), which is compiled by S&P Global from responses to questionnaires sent to purchasing managers in a panel of around 650 construction firms in the eurozone.
The headline figure is the total activity index, which tracks changes in the total volume of construction activity compared with one month previously. At 52.8 in March, the total activity index dropped from 56.3 in February and pointed to the slowest expansion in overall construction activity since last October.
Data showed a sustained, yet slower rise in activity across the three monitored sub-sectors, with house building leading growth. Home building in the eurozone increased for the thirteenth consecutive month in March. That said, the rate of expansion eased to the softest for five months and was only modest.
Work undertaken on commercial construction projects rose for the sixth successive month during March. The rate of increase was modest, however, and the slowest seen since October 2021.
Civil engineering activity increased at the slowest pace in the current three-month sequence of expansion during March.
Eurozone construction companies signalled a broad slowdown in new order growth in March. The expansion was the weakest for seven months, as higher prices and the outbreak of war in Ukraine dampened client confidence.
French firms signalled a second expansion in three months, while growth at Italian companies was the softest since mid-2021, yet still marked. There was a renewed and solid reduction in Germany that was the sharpest seen for four months.
Usamah Bhatti, economist at S&P Global, said: "Latest PMI data indicated that the eurozone construction sector was not spared the ever-growing uncertainty that stemmed from accelerated costs and the potential impacts of the Russia-Ukraine war. As a result, output growth eased to a five-month low while growth in new work decelerated to the softest since last August. Firms across the sector noted that rising costs and material shortages weighed increasingly on sector performance at the end of the first quarter. Notably, input costs continued to rise at a substantial pace amid increasingly severe supply chain delays. These lingering issues weighed heavily on business sentiment, with eurozone construction companies reporting pessimism regarding the year ahead outlook for activity for the first time in 15 months.
“At the national level, French firms reported a renewed reduction in activity that was the fastest for seven months. Firms in Germany and Italy noted softer expansions in March, though growth rates in the latter remained marked overall.”
Supplier delivery times lengthened to a greater extent for the second month running in March. Moreover, the degree to which vendor performance deteriorated was the most severe since last July and among the sharpest on record.
The seasonally adjusted input prices index pointed to a sustained and considerable rise in costs faced by eurozone construction firms in March. The rate of inflation accelerated from February and was the fastest seen for seven months.
On a national level, cost burdens accelerated across all three monitored economies, with Italian firms seeing the sharpest rise in the survey's history.
The overall degree of business confidence regarding the year-ahead outlook receded sharply during March, with companies reporting pessimism for the first time since December 2020. German expectations were downbeat for the second month in a row, with the degree of pessimism the strongest since May 2020. Italian firms were by far the most optimistic, though confidence eased to a 15-month low. Sentiment in France also eased to the weakest since last December.
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