German construction sector records sharp rise in activity in January

German construction sector recorded a sharp and accelerated rise in total industry activity. The headline seasonally adjusted PMI index surged to 59.8 in January from December’s 53.7. This is the highest reading since March 2011. All areas of the construction sector performed robustly in January, with the respective paces of growth in housing and commercial activity among the most rapid on record. The latter witnessed the most robust overall growth in January. The level of work on civil engineering projects also rose, thus reversing the back-to-back contractions witnessed in the final two months of 2017.

New orders received by constructors in Germany rose for the second straight month in January. Moreover, after rebounding significantly from the modest rate seen in December, the pace of growth was the most rapid seen in the series history. Construction companies upped their rate of job creation to accommodate the increased levels of activity and new orders, with the extent of the rise in payroll figures in January bettered just once in the survey history. There was also a significant rise in the use of sub-contractors.

Constructors’ quantities of purchases saw a similar trend, rising at a pace rarely seen since the inception of the survey. This extra demand for raw materials and building components placed greater pressure on suppliers, whose delivery times were shown to have deteriorated for a 40th consecutive month in January. However, the deterioration in vendor performance was the least marked since last March. On the cost front, January’s survey showed an additional steep rise in average prices paid for purchases. The pace of inflation rose slightly from that seen in December and was well above the historical series trend. But it remained below last October’s recent peak.

Constructors in Germany have recorded solid optimism towards the outlook for activity in the year ahead. The extent of confidence rebounded to a six-month high, although it continued to be below the record levels seen in the first half of 2017.

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