Germany construction sector activity slows in February

Construction sector in Germany saw the level of total industry activity rise in February, but at a slower rate than in January. The headline PMI index dropped to 52.7 in February from January’s print of 59.8. The latest reading was the lowest seen for 13 months; however, it nevertheless hinted at the continuation of a spell of growth stretching back over three years.

February saw sustained growth in both commercial and housing activity, with the former remaining the construction sector’s strongest growth area for the fourth month in a row. However, civil engineering returned to contraction after a brief upturn at the beginning of the year. The level of work on infrastructure projects dropped for the third time in the past four months in February, although just marginally.

The survey found that demand for construction work continued to rise, supported by a rebounding domestic economy. This was shown in a 16th consecutive monthly rise in the level of new orders. Although weaker than January’s survey record, the pace of growth in order books continued to be strong. Buoyed by a solid pipeline of new work, constructors hinted at a solid optimism towards the year-ahead outlook. The survey’s measure of business sentiment surged from January to its second-highest level in the series history.

Construction continued to expand staffing figures in the month of February as they tried to keep pace with a rising level of activity. However, the pace of job creation was at a 12-month low, having eased sharply from that seen at the beginning of the year. The use of sub-contractors also rose more slowly, though a lack of availability maintained solid upward pressure on rates charged.

Meanwhile, constructors also faced a steep rise in average prices paid for building materials and products. The pace of inflation rose to a four-month high and was elevated in the context of the series history. Purchasing activity among constructors indicated further solid growth midway through the first quarter, in spite of the pace of growth after the wider trend and weakening since January. Moreover, the rise added to a notable deterioration in supplier delivery times.

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