Construction of homes going up in Eurozone as commercial and civil work declines

(Photo: Darrell/flickr)

A renewed increase in new house-building orders is underpinning growth in the eurozone’s construction sector, though commercial work and civil engineering continue to decline.

There has been a record rise in input costs amid severe deterioration in supplier performance, according to the latest figures from the IHS Markit Eurozone Construction PMI. The research is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of about 650 construction firms in the eurozone.

The headline figure is the Total Activity Index, which tracks changes in the total volume of construction activity compared with one month previously. The index rose slightly from 50.1 in April to 50.3 in May, signalling a third consecutive expansion in activity. Though fractional overall, the rate of growth was the quickest recorded since February 2020.

Usamah Bhatti, economist at IHS Markit, said: “The upturn in the eurozone construction sector continued in May, as businesses reported a slightly stronger expansion in activity. At the same time, new order growth resumed at a solid pace that was the strongest since February 2019. Yet, widespread reports of shortages of raw materials across the bloc and beyond placed severe pressure on supply chains, as indicated by a record lengthening in supplier delivery times. This contributed to the quickest upturn in input costs since data became available in January 2000. Nonetheless, construction firms in the bloc were increasingly optimistic regarding the outlook for activity over the coming 12 months. Confidence was positive for the fifth month running amid hopes that the end of the pandemic would boost activity and demand. At the national level, Italian and French firms reported rises in activity, with the latter recording the first expansion since June 2020. That said, German builders signalled a sustained and faster fall in construction output in May.”

Companies often linked the latest rise in activity to the start of new projects as demand resumed amid sustained government incentives for the construction sector.