The euro area's construction sector has continued its downward trend through the end of 2024, experiencing a significant drop in new orders for the 33rd consecutive month. This decline reflects ongoing weakness in demand, as indicated by a recent survey from Hamburg Commercial Bank and S&P Global. The HCOB Eurozone Construction PMI Total Activity Index slightly improved to 42.9 in December 2024, up from 42.7 in the previous month; however, it remains firmly entrenched in contraction territory.
The most pronounced decreases were observed in Germany and France, whereas Italy registered its initial increase in activity since March 2024. Among the three segments monitored—housing, commercial, and civil engineering—the housing sector faced the most considerable downturn. It was followed by milder contractions in commercial and civil engineering.
Economist Tariq Kamal Chaudhry from Hamburg Commercial Bank noted, "Housing activity is in deep crisis, shrinking disproportionately compared to commercial and civil engineering activities. To revive the residential property sector, significant interest rate cuts by the ECB would likely be necessary soon." The persistent weak demand has led construction companies throughout the eurozone to further reduce their workforce.
Purchasing activity also took a hit, marking the fastest rate of contraction witnessed in the last six months. Looking ahead, builders in the eurozone have expressed considerable pessimism regarding the sector's prospects for 2025. Specifically, firms in Germany and France conveyed particularly negative outlooks, contrasting with the more optimistic sentiment from Italian companies, despite their expectations softening compared to the previous month.
Chaudhry remarked, "Eurozone looks ahead with pessimism. The year 2025 is unlikely to significantly reduce the downward pressure in the sector. Although both order intakes and future activity have increased compared to the previous month in December (with future activity rising significantly), the sub-indices remain firmly in contraction territory.".