German construction activity slows down in January, PMI index falls to 50.7

The latest IHS Markit construction PMI data for January saw that the construction activity in Germany continued to rise, though severe bad weather in parts of the nation saw the pace of growth slow compared with the relatively mild December.

The headline PMI rate dropped to 50.7 from December’s 53.3. This is its lowest reading in the current three-month sequence of growth. The deceleration was led by a renewed fall in commercial activity, which dropped to the greatest degree in nearly six years after modest growth in November and December. Moreover, housing activity rose at a much slower rate than in December. Civil engineering was the only area of construction that started the year on a stronger footing, recording a rise in activity for the first time in three months.

The recent rise in construction order books extended to a fifth consecutive month in January. The pace of growth moderated since December, but it was still strong overall and the second most rapid seen in the last 11 months.

The employment and purchasing activity have a similar story, both of which were raised by constructors in the month because of greater workloads, but more slowly than in the preceding survey period. On the contrary, sub-contractor usage indicated the greatest rise since May last year. With the availability of sub-contractors continuing to fall, January saw a steep and accelerated rise in rates charged.

Adding to the cost pressures faced by constructors, average prices paid for building materials and products rose sharply in the month. The pace of inflation was among the most rapid seen in the last eight years, with surveyed businesses commenting on a rise in energy costs and the effect of the hike in road toll charges at the beginning of the year. German constructors saw a further rise in lead-times on purchased items in January. Though still substantial by historic standards, the fall in vendor performance was the least marked since April last year.

Looking ahead, constructors saw positivity towards the outlook for activity in the next 12 months, citing backlogs of work and hopes for new projects. The extent of sentiment was at a six-month high, although well below the record levels seen at the start of 2018.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 5.25989, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 56.6797. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex