Construction activity in the eurozone remained ‘firmly’ in contraction territory in May, according to the latest S&P Global Eurozone Construction PMI.
On a month-on-month basis, the pace of decline in the eurozone construction sector eased, the data showed, with the Total Activity Index rising from 41.7 in April to 43.7 in May.
“Operating conditions in the eurozone construction sector remained in poor shape during May,” commented Usamah Bhatti, economist at S&P Global Market Intelligence. “The three main sectors monitored by the survey continued to see sharp, albeit softer declines in total activity, led by the residential sub-sector.”
Weak demand
Construction companies continued to face weak demand conditions, with new orders falling sharply for another month.
On a country-by-country basis, France recorded the steepest drop in new business, while Germany and Italy also reported declines, although the downturn moderated in both countries.
“Some positivity can be taken from a regional viewpoint, as Italian firms signalled that activity moved close to stabilising following two months of robust deteriorations,” Bhatti added. “Contractions in France and Germany were still marked, however.”
Core segments
In terms of the three main construction segments, housing activity continued to post the sharpest decline, followed by commercial construction, while civil engineering recorded the least severe contraction.
Despite the softer downturn, firms remained cautious about the outlook. Employment and purchasing activity both fell again during May, although at slower rates than in April. Construction companies also maintained a negative outlook for activity over the coming year, extending a run of pessimistic sentiment to three months.
The survey highlighted continuing disruption to supply chains and costs. Input prices remained elevated across the eurozone construction sector, although inflation eased slightly from April’s three-and-a-half-year high. At the same time, supplier delivery times lengthened at the fastest pace since December 2022.
“Price and supply disruptions were again a pivotal factor weighing on the eurozone construction sector,” said Bhatti. “Input price inflation eased only marginally from April’s near four-year high, and vendor performance deteriorated to the greatest extent since December 2022.
“Anecdotal evidence suggested that difficulty sourcing and receiving inputs due to shipping delays, amid higher fuel and transportation costs, were key reasons behind disruption to the sector. These were often linked to the residual disruption caused by the war in the Middle East.” Read more here.
.
.
