German Construction Activity Contracts Sharply

RTTNews | 99 days ago

(RTTNews) - Germany's construction activity continued to contract sharply in May with firms recording a sustained fall in activity alongside soaring input costs, survey data from S&P Global showed Thursday.

The construction Purchasing Managers' Index posted 42.4 in May, up from April's 13-month low of 42.1.

The index has remained below the 50.0 no-change mark signalling a marked rate of contraction.

There was broad-based decline in the construction sector. Housing activity posted the steepest fall followed by commercial activity. Work on civil engineering projects dropped for the first time in seven months.

Firms cited lack of incoming new orders and depleted backlogs of work as reasons for weaker activity.

New orders continued to fall at a sharp rate amid geopolitical tensions and elevated price pressures. Input prices increased again in May and remained close to April's 47-month high due to higher energy cost.

Firms faced worsening supply delays due to the fallout from the war in the Middle East. Average lead times lengthened to the greatest extent since July 2022.

Companies stayed firmly in retrenchment mode. Employment declined for the fourth straight month. Further, constructors scaled back their purchasing activity substantially.

Construction firms remained downbeat about growth prospects in the coming year. Although expectations improved slightly since April, they were still the second-lowest in the past 16 months.

"Conditions in the construction sector remain challenging to say the least, with virtually no let-up on either the demand or cost front since April," S&P Global Market Intelligence Economics Associate Director Phil Smith said.

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