German construction activity rises modestly in August

German construction activity has risen modestly in August, showed latest data. The data also revealed ongoing capacity restrictions throughout the sector. The headline seasonally adjusted German Construction PMI index rose to 51.5 in August. The top-performing construction sub-sector in August was civil engineering, where activity recovered after a downturn at the beginning of the third quarter, followed closely by commercial building. The rates of growth of both infrastructure and commercial activity were only modest, however, as was the case for work on housing related projects.

The levels of building activity increased in August in spite of businesses in the sector reporting a lower intake of new orders in the month. The reduction in construction order books was the first seen since April and partially linked by surveyed companies to a lack of available resources. Pressure on capacity led to constructors taking on additional staff in August, with the rate of job creation picking up from July’s one-and-a-half year low. However, the use of subcontractors continued to decline, reflecting a further sharp fall in availability. With subcontractors in short supply, rates charged to building companies continued to increase sharply.

Moreover, August recorded a steep and accelerated rise in average prices paid for building materials and products. The pace inflation was the most rapid since October last year, with several surveyed businesses attributing the rise in input prices to the effects of new road toll charges. Supply chains also continued to be stretched in August, as underlined by a further marked rise in average lead times on purchased items.

The latest deterioration in vendor performance was the most marked since last November. The latest data showed a weakening of constructors’ expectations towards activity over the next 12 months.

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