The construction sector in the Eurozone remains under significant strain, registering a decrease in activity for the 28th consecutive month in August, according to recent survey data from Hamburg Commercial Bank and S&P Global. This ongoing downturn adds heightened pressure on the European Central Bank (ECB) to consider interest rate reductions to stimulate the economy. The HCOB Eurozone Construction PMI Total Activity Index has remained unchanged from the previous month's six-month low of 41.4.
Germany, being the largest economy in the Eurozone, exhibited the most pronounced decline in construction activity for the past three months, a trend mirrored by France and Italy, although at a less severe rate. Examining the various segments within the construction space, it is evident that housing has suffered the sharpest decline since April 2020.
This is complemented by a consistent deterioration in commercial activity which has stagnated at the same level as July 2024. Civil engineering, meanwhile, continues to struggle, remaining entrenched in a steep contraction. According to economist Tariq Chaudhry from Hamburg Commercial Bank, the ongoing crisis in the construction sector reveals “no signs of abating.” As construction activity continues its downward trajectory, the ECB faces mounting pressure to act, particularly in light of August's inflation rate in the Eurozone, which stood at 2.2% year-on-year, very close to the ECB’s target rate. In an unsettling trend, new orders in the construction sector have plummeted for the 29th month in succession.
This has led construction companies to persist in retrenching their workforces for the 18th consecutive month while reducing their purchasing activities for the 27th month in a row. Looking ahead to the upcoming year, business sentiment appears bleak. Construction firms in both France and Germany have expressed a negative outlook for the future, although the severity of their pessimism has moderated since July.
In Italy, growth expectations within the construction sector have softened to a two-year low, highlighting a concerning trend across the region's construction landscape..