German construction sector’s industry activity grows in April

German construction sector’s industry activity returned to growth in April, following severe disruption to building work caused by severe weather during the end of the first quarter. The headline seasonally adjusted PMI index rose to 50.9 in April. Still, the latest reading was the second-lowest seen for the just under two years, and it was indicative of a much slower rate of growth than that seen on average last year.

Out of the three wide areas of activity monitored by the survey, house-building indicated the steepest rise in April. But, consistent with the wider trend, the rate of growth was weakened by recent standards. Commercial activity indicated an even smaller recovery, rising just marginally on the month. Civil engineering meanwhile stayed in contraction, albeit with the pace of decline slowing compared with that seen in March.

The survey implied that the pace of total activity growth was partially curtailed by capacity constraints, with the opening quarter of 2018 having seen a sharp rise in new orders that was the most solid in more than 18 years of data collection. April saw order books drop for just the second time since late-2016, with some surveyed businesses recording that they lacked the resources to take on more new work.

Constructors’ attempts to stimulate capacity were seen in a further marked rise in employment in April. Moreover, the pace of job creation was the strongest for three months and more rapid than that seen on average over the current 34-month sequence of growth. The quantity of building materials and components purchased by companies also rose at a stronger rate in April, the pace of growth picking back up from March’s two-and-a-half year low.

The pace of purchase price inflation in the construction sector indicated sharply in April, down to its lowest since December 2016. In the meantime, suppliers’ delivery times rose, though reports of delays remained far less prevalent that in 2017. Finally, April’s survey indicated solid sentiment among constructors in regard to the year-ahead outlook for activity. The degree of positivity rebounded marginally from that seen in March and reached a new record-high.

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