Euro area construction activity eases in January, PMI index falls to 50.6

Euro area’s construction activity rose in January at the softest pace since July 2018. The headline IHS Markit construction PMI dropped to 50.6 from December’s 53.1, hinting at the slowest growth in six months. The pace of growth moderated in Germany and Italy, while French constructors saw the first contraction for five months.

Looking at sub-sector level, commercial and infrastructure activity dropped in January. Even if the declines were just marginal overall, it was the first time that any two of the three covered categories had recorded contraction for six months. Continued growth in house building supported the overall rise in sector activity, although here the pace of growth decelerated to a marginal rate.

New orders at euro area constructors also rose at a softer rate in January. Companies saw the slowest rise for four months, driven by a contraction in new work at French companies. With a softer rise in demand for their services, construction companies in the euro area increased their staff figures at the slowest rate for almost two years in January. At the national level, employment growth decelerated in Germany and France, while there was a reduction among Italian companies.

Similarly, companies increased input purchasing at a slower rate in January. Purchasing activity grew at the softest rate in three months, in the midst of a widespread deceleration throughout Germany, France and Italy. Supplier delivery times lengthened for the 77th consecutive month in January. Nevertheless, vendor performance eased at its softest rate for eight months.

Input costs faced by the currency bloc’s construction companies rose at a historically marked rate in January. The pace of inflation was more rapid than that registered in December and supported by a sharper rise in costs burdens at German companies. In spite of weaker rises in overall activity and new business, construction companies in the euro area recorded their highest level of sentiment towards the business outlook for six months. Improved confidence in France and Germany, contrasted with softer optimism among Italian companies.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bearish at -60.3563, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 117.882. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex