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Further decline in construction in Italy

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Christian Fernsby ▼ | February 7, 2020
The start of the year saw a further decrease in building activity in the Italian construction sector.
Italy construction
Economy in Europe   Firms remained cautious about hiring and purchasing activity
Total building work for each of the three monitored sectors fell further in January, driven by another fall in new sales.

Topics: Construction Italy

Firms remained cautious about hiring and purchasing activity, contributing to a stagnation of employment and a further reduction in the purchase of construction inputs.

While positive, business sentiment remained relatively subdued.

Meanwhile, input costs accelerated in January, fuelled by higher prices for raw materials.

The headline figure from the survey is the IHS Markit Italy Construction Total Activity Index.

This is a diffusion index that tracks changes in the total volume of construction activity compared with one month previously, and is adjusted for seasonal variations.

The Total Activity Index rose from 47.7 in December to 49.0 in January.

The latest reading signalled a third successive monthly decline in overall construction activity, albeit one that was slower than that seen in December and only marginal.

All three construction sub sectors registered lower activity levels.

However, the rates of decline for housing and commercial activity were only marginal.

By contrast, civil engineering work fell at a quicker pace than that seen in December, with the reduction among the steepest in the current 14 month period of decline.

The volume of new orders received by Italian construction firms fell for the third month in a row during January.

However, the pace of decline eased from the solid rate seen in December.

The deterioration in demand conditions across the construction sector contributed to another decline in the purchase of input materials.

Quantity of purchases fell for a third straight month, representing the longest period of contraction for just over two and a half years.

Despite weak demand for inputs, delivery times continued to lengthen, with anecdotal evidence suggesting that lower inventory levels at some distributors were a key factor behind delays.

Lower sales also weighed on hiring, with staff levels unchanged from the previous month following a fall in December.

Meanwhile, Italian construction firms remained positive about the growth of workloads in the year ahead, though overall sentiment remained relatively subdued in the context of recent years.

At the same time, the use of sub contractors rose at the start of the year, with the rate of increase the fastest since May 2018.

The availability of sub contractors on the other hand continued to decline.

With demand exceeding supply, subcontractors raised their rates further in January.

That said, the standard of their work was perceived to have deteriorated further at the start of 2020.


 

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