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Euro area’s construction activity rebounds in June, PMI index rises to 48.3
Euro area’s construction activity rebounded in the month of June, but remained in contraction territory. The IHS Markit Eurozone Construction Total Activity Index rose sharply to 48.3 from May’s 39.5, implying the weakest fall throughout the euro area since February amidst a relaxation of measures designed to control the COVID-19 crisis.
According to the survey data, France and Italy saw growth in construction output, whereas Germany saw a further marked decline. Work undertaken on home construction projects in the euro area fell further at the end of second quarter. However, the rate of contraction eased markedly from May and was only modest overall. The downturn in housing construction activity was led by Germany and France. On the contrary, Italy saw a second monthly rise in home building activity.
Commercial building activity throughout the euro area declined further in the month. The pace of fall decelerated further from April’s print, but was marked overall. Germany mainly drove the decline, while France and Italy saw growth, with the former doing so after three straight months of fall. In the meantime, euro area civil engineering activity likewise fell further in June, extending the current sequence of contraction to 11 months. The pace of fall was markedly slower than May but remained steep overall. National data revealed a fall in civil engineering in Germany and Italy while France recorded growth.
New business received by euro area construction companies dropped further in the month, though the pace of fall decelerated markedly from May. While lower sales were attributed to soft client demand, there were reports that the easing of COVID-19 restrictions stimulated orders at some companies. In the midst of reduced activity requirements, euro area’s construction companies continued to lower capacity. Consequently, employment contracted for the fourth straight month. Nevertheless, the pace of fall slowed markedly from May, and was modest overall.
The data for June indicated towards a further decline in purchasing activity at euro area construction firms. Nevertheless, the pace of contraction decelerated and was modest overall. Supply chains continued to be under pressure at the end of the second quarter. In spite of easing from May, delivery times still lengthened at a marked rate.
Input price inflation intensified in the euro area construction sector in June, with the pace of increase accelerating to a three-month high. Increased costs were attributed to greater prices for raw material. In all, confidence among euro area’s building firms continued to be negative in June. This was also reflected by the Future Activity Index remaining below the neutral 50.0 level in spite of rising to a four-month high. Companies continued be concerned about the effect of COVID-19 measures on investment. Germany and France both saw a negative construction outlook, while Italian constructors’ confidence rose sharply to the highest for just over one year.