Euro area’s construction activity grows at rapid pace in December, PMI index rises to 51.3

Euro area’s construction activity rose in December at the most rapid pace for eight months, according to the latest PMI data. The IHS Markit Euro area construction PMI index rose to 51.3 from November’s 50.6. Today’s data indicates towards a faster growth in construction activity throughout the currency bloc. The latest rise was driven by accelerated growth in both Germany and France. Throughout the euro area’s three largest economies, only Italy recorded a reduction in construction activity.

Looking at the sub-sector, faster growth was mainly due to home building, where the pace of activity growth was the fastest since May. The rise in total activity was also underpinned by a marginal rise in commercial sub-sector. In the meantime, work undertaken on infrastructure projects continued to fall, with the pace of fall slightly changed from October and strong overall. An important factor behind the rise in total construction activity was a further rise in new orders in December. Furthermore, the pace of growth was the most rapid since last February and historically marked.

Solid sales growth led companies to continue increasing their staff numbers in December. The latest workforce growth extended the current sequence to almost three years. The pace of job creation was a bit weaker than that seen in November, but stayed strong overall. Similarly, construction companies in the euro area continue to increase their purchasing activity in December. Although it stayed modest overall, the pace of growth accelerated from November. At the national level, greater input purchasing in Germany and France more than countered a fall in Italy.

In the meantime, amidst rebounded demand conditions supplier delivery times faced by euro area construction firms continued to lengthen. Vendor performances worsened to a lesser degree than in November, but at a historically marked rate. Underlying data indicated to slower deliveries in each of the euro area’s three largest economies.

On the cost front, input prices in the euro area construction sector increased further in the month. Nevertheless, the pace of inflation was the weakest for more than three years. Of the euro area’s three largest economies, the slowest rise was seen in Italy. Finally, confidence towards the one-year business outlook was neutral in December. National data implied that negativity in Germany was countered by confidence in France in Italy.