German construction sector activity sees strong growth in December, PMI index rises to 53.3

Construction sector in German ended the year 2018 on a stronger footing, showed the year’s final PMI data, with an upturn in homebuilding driving the steepest rise in total industry activity for seven months. The headline seasonally adjusted Germany Construction Purchasing Managers’ Index rose to 53.3 from November’s 51.3.

This is the strongest growth in total industry activity in seven months. December’s index was driven by strong and accelerated rise in the level of housing activity, which rose at the most rapid rate since last May. Growth in commercial activity eased a bit and was only modest overall, while work on civil engineering projects fell for the second consecutive month.

Anecdotal evidence showed that milder-than-usual weather in some areas in the month aided in underpinning activity levels. The same factor also added to a rise in inflow of new business, with constructors recording the strongest rise in order books for 11 months in December.

Greater workloads in turn had a positive effect on hiring. Employment rose at the most rapid for eight months, with the rate of job creation recovering further from the near two-and-a-half year low seen in October. Concurrently, there was a renewed rise in constructors’ use of subcontractors after the slight falls recorded in October and November. The brighter picture also extended to constructors’ purchasing activity, which indicated the steepest rise for four months in December.

The latest survey indicated a weakening of capacity pressure throughout the sector. The incidence of input delivery delays was the lowest since last May, while the degree to which subcontractor availability deteriorated was the least marked for nearly two-and-a-half years.

Constructors continued to face sharply increasing costs in December. Although easing from November’s 13-month high, the pace of input price inflation continued to be among the strongest seen in the last seven years, attributed to h higher energy and transport costs. The rate of rise in subcontractor rates stayed at its highest since last May.

The survey for December showed that constructors stayed just mildly positive regarding the outlook for activity. Business sentiment recovered further from October’s near three-year low, though the degree of positive sentiment stayed much softer than earlier in 2018.

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