Construction activity in the eurozone remained in the doldrums during August with a sharp fall in new orders and rising prices causing concern as employers laid off staff, according to a survey published on Thursday.
The HCOB eurozone Construction purchasing managers index was unchanged from July’s six-month low of 41.4, signalling a steep reduction in total construction activity across the single currency area – a mark below 50 indicates contraction. Activity has now fallen in each of the last 28 months.
Data showed the construction sector remaining in decline midway through the third quarter of 2024, with new orders falling “markedly”, leading to a further reduction in construction activity and sustained retrenchment of employment and purchasing.
Price pressures picked up slightly from July but remained below the long-run average, while suppliers’ delivery times improved for the fifth month running. However, companies remained pessimistic regarding the year-ahead outlook.
“The overall reduction in activity reflected declines across the three largest eurozone economies in August. Activity in Germany decreased at the sharpest rate in three months, while there were slightly softer contractions in France and Italy,” HCOB said.
New orders decreased for the twenty-ninth consecutive month. The pace of decline eased from the previous survey period, but remained “substantial”.
As new business fell further, firms continued to cut jobs and input purchases during August. Staffing levels fell for the eighteenth consecutive month at a pace that was little-changed from July. The overall reduction in workforce numbers was centred on Germany, where the decrease was the strongest since May.
“The crisis in the European construction sector shows no signs of abating. The particularly weak performance of the largest economies in the Eurozone—Germany and France—weighs heavily on the index. Especially the housing sector presents a troubling trend,” said HCOB economist Dr Tariq Chaudhry.
“With the construction sector remaining sluggish, pressure is mounting on the European Central Bank (ECB) to counteract with interest rate cuts, especially as inflation in the Eurozone came in at 2.2% year-on-year in August, nearing the ECB’s target rate.”
“European construction firms are looking to the future with skepticism. Although new orders and purchasing volumes have seen a slight improvement compared to the previous month, the contraction in these sub-indices remains pronounced.”
Reporting by Frank Prenesti for Sharecast.com