The construction industry in Germany saw a significant decline towards the end of the first quarter due to a pessimistic outlook from constructors. This negative sentiment is largely due to low demand triggered by high interest rates and economic uncertainty, according to a survey from S&P Global reported on Friday.
The construction purchasing managers' index fell to 38.3 in March from 39.1 in February. A score below 50.0 indicates a contraction in the industry. This marks a continued decline that has been ongoing since April 2022.
Out of the three main sectors of construction—housing, commercial, and civil engineering—the drop in activity was most noticeable in the housing sector. Commercial projects also experienced significant contraction, although at a slightly slowed rate compared to the last five months. Civil engineering activity also recorded a substantial contraction in March.
Furthermore, new orders continuously fell at an increased pace due to a combination of financial restraints, high prices, and market uncertainty. The survey also highlighted a decrease in employment and purchasing activity in March compared to February. However, the lead times for building materials have lowered amid reports of reduced strain on supply chains.
With regards to prices, March experienced a slowdown in input price inflation, bringing it to a four-month low. German construction companies voiced severe pessimism regarding the business outlook for the coming 12 months, citing a challenging political and economic environment.
