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Stronger demand for eurozone construction

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Christian Fernsby ▼ | February 7, 2020
January data painted a brighter picture of the eurozone construction sector, with a quicker rise in new work intakes underpinning faster increases in activity, input buying and employment.
Eurozone construction
Economy in Europe   Germany was the strongest link
Moreover, the mood among builders improved from December, with firms at their most upbeat since mid2019.

Topics: Eurozone construction

Of the euro area's three largest economies, Germany was the strongest link as trends for construction output, home building, new orders, employment and input buying were all better than the trends in France and Italy.

The IHS Markit Eurozone Construction PMI rose from 51.3 in December to 51.9 in January, to signal the strongest rate of expansion in output since April 2019.

Growth of residential and commercial work accelerated to nine and four month highs respectively, but civil engineering activity declined further.

Eurozone builders recorded a fourth successive rise in new work, with the pace of growth the fastest in almost one year.

Germany saw a stronger rate of expansion than France, while Italy continued to register a contraction.

In response to rising workloads, eurozone constructors continued to add to their workforces.

Payroll numbers have increased in each month over the past three years, with the upturn noted in January the strongest since last March.

Job creation accelerated in Germany and eased in France, while employment stabilised across Italy.

As has been the case on a monthly basis for over three years, eurozone firms purchased additional building materials in January.

Input buying rose at a solid pace that was the quickest since last April.

In turn, stronger demand for inputs exerted upward pressure on prices, with the rate of inflation climbing to a sevenmonth high.

Sub contractor rates also increased to a greater extent, the fastest since April 2019.

Underlying data indicated that a combination of stronger demand for sub contractors and falling availability caused the uptick in their rates.

The supply of labour willing to undertake sub contractor work in the eurozone construction sector worsened markedly and at the fastest pace in three months.

At the same time, survey participants indicated another deterioration in the quality of the work undertaken by subcontractors.

Assessments of dissatisfaction were given by German, French and Italian builders.

Meanwhile, supplier delivery times in the euro area construction sector lengthened to the greatest extent in seven months at the start of 2020.

The deterioration in vendor performance was most pronounced in Germany, followed by Italy and then France.

Eurozone builders were upbeat towards growth prospects, following a neutral outlook at the end of 2019.

The degree of optimism was strong by historical standards and was at a six month high.


 

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