Aerial view over machinery at a solar farm construction site (Image: TechAnimationStock via AdobeStock – stock.adobe.com)
October saw a sharp reduction in new construction orders in the Eurozone, according to the latest sounding of construction buyers in the region.
The HCOB Eurozone Construction Purchasing Managers’ Index (PMI) registered a decline in total activity to 44.0 in October, down from 46.0 in September (where any score less than 50.0 indicates a contraction).
It was the most pronounced decline for eight months although performances varied by Eurozone countries. Germany and France both saw declines in activity, with a faster drop in France. But Italian companies registered their first growth in four months..
The survey found that the overall downturn stemmed from the housing and civil engineering segments. The housing sector was the worst performer, while civil engineering fell at the fastest pace in three months. Commercial construction also declined sharply but at a slightly softer rate than in September.
The sales environment was particularly tough in Germany and France, where there was the strongest reduction in new orders since May 2020. But new orders rose for a second consecutive month in Italy.
Dr. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said, “One thing seems pretty clear: the construction sector won’t be driving growth in the Eurozone anytime soon. Quite the opposite, the sector has slowed down expansion across the currency union since 2022, and things got even tougher for construction firms in October. While the situation in Italy is at least holding steady, Germany’s sector is sinking deeper into the proverbial swamp. And with political situation getting more fragile, France looks set to follow Germany’s path.
“The construction recession in the Eurozone is most pronounced in residential construction, led by Germany and France. Italy, meanwhile, is showing just a hint of growth. In Germany, the impact of a third year without economic growth is becoming more visible, and in France, the politically fragile environment is leaving its mark. Italy’s sector is getting some support from its (albeit modest) economic growth.
“There had been high hopes for civil engineering, especially in Germany, the Eurozone’s largest economy, that we would already be seeing some lasting positive effects. But after two months of growth, activity has taken a sharp dive. We expect a broader range of public projects to get underway next year, which should help this sector grow more steadily. In France, though, the planned austerity measures and political uncertainty are likely to keep this sector weak. Italy’s civil engineering has found some stability, but with tight budgets, big leaps forward aren’t likely.”
