German construction output stagnates in June; growth likely to slow ahead

Germany’s construction output has almost stagnated in June, based on the PMI data. The seasonally adjusted Purchasing Managers’ Index dropped to 50.4 in June from May’s 52.7. This hints at an additional slowdown in the pace of output growth at German building companies. Both commercial building and civil engineering activity fell in the month. Even if the construction activity grew for the 17th straight month, the latest growth was just marginal.

Civil engineering activity dropped for the second straight month. The contraction pace was moderate; however, it was the most marked since August 2015, noted Markit. Commercial activity also dropped in June, bringing an end to the 16 consecutive months of growth. The pace of decline was modest.

In the mean time, residential building output grew for the 21st straight month in June. But the pace of growth decelerated further from February’s record high. The amount of new work at German constructors widely stagnated at the end of second quarter. This brings an end to the six-month period of growth. Certain firms commented on capacity problems.

In spite of a decelerating activity growth and stagnating new business, firms hired employers in June. The pace of creation of job quickened from the previous month; however, overall it was moderate. Simultaneously, constructors increased their purchasing activity in June. But the pace of growth decelerated to the weakest in seven months. There was a further increase in average lead times for construction materials in June.

Meanwhile, inflationary pressures also continued to build. Higher steel prices and shortages in raw materials led to the sharpest increase in input costs since May 2012. Nearly one-third of the survey panel recorded a rise in input prices. German building firms on average expect activity at their units to increase in the coming 12 months. But the level of positive sentiment declined to a six-month low, added Markit.