Euro area’s construction activity falls at slower pace in May, PMI index rises to 39.5

The construction activity in euro area has dropped in May, but at a slower rate. The IHS Markit Eurozone Construction Total Activity Index rose to 39.5 in May from April’s record low print of 15.1. However, the latest reading still showed a steep fall in the construction activity throughout the euro area. Survey data indicated that Germany and France saw a third consecutive month of fall in construction output. On the contrary, Italy recorded a rise in home building activity after a two-month period of severe falls.

Similarly, work undertaken on commercial construction projects in the euro area dropped further midway through the second quarter. However, the rate of contraction eased significantly from a record fall in April. The sharpest contraction was seen in France, followed by Germany. Italy recorded growth after a collapse of commercial building activity in April. Civil engineering in euro area activity dropped further in May. In all, the pace of fall was significant, but markedly slower than April’s record.

The falls in construction output decelerated noticeably in Germany and France in the midst of easing of lockdown measures, though the rates of contraction remained steep. Meanwhile, Italy saw a marginal rise in construction activity after a collapse in April. New business received by euro area construction companies dropped considerably further in the month. Anecdotal evidence implied that delays in tenders and suspensions of construction activity amid the COVID-19 pandemic continued to dampen demand. At the national level, the downturn was across the board, led by France.

Construction companies in the currency bloc sought to lower capacity in May as activity requirement continued to decline. Employment shrank for the third straight month. In spite of easing from April, the pace of job shedding remained among the sharpest recorded since the global financial crisis of 2008/2009. Supply chains remained under severe pressure midway through the second quarter.