In September, Germany's construction sector experienced a contraction at the slowest rate witnessed in 16 months, according to data released by S&P Global on Friday.
The Construction Purchasing Managers' Index (PMI) increased to 41.7, up from 38.9 in the previous month, marking the highest level since May 2023. Despite this rise, the index remains below the threshold of 50.0, indicating ongoing contraction in the sector.
The decline in activity within both the housing and commercial segments softened; however, housing continued to underperform relative to the other major sectors. Conversely, civil engineering experienced a slightly accelerated decline in activity.
The survey highlighted a faster drop in new orders, reflecting the impact of market uncertainty, tightened financial conditions, and elevated costs weighing on demand.
Owing to the decrease in incoming work, construction firms continued to reduce their workforce numbers in September, a trend persisting over the past two and a half years.
Companies in the construction sector also made more significant reductions in purchasing activities, resulting in the sharpest decline observed in three months. This was a consequence of weak demand for materials, along with falling fuel and commodity prices, leading to another decrease in average purchasing costs.
Subcontractor rates faced additional downward pressure, amid a marked improvement in subcontractor availability. The rate decline was notably the most significant since November 2012.
The survey also reported worsening business expectations within the construction sector. Confidence for the upcoming year declined substantially from August and was at its weakest in 2024 so far. Concerns among businesses centered on diminishing new orders, the overall health of the economic environment, and policy uncertainties.
"The construction sector is beginning to show some slight signs of improvement, but caution is still advised," commented Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. "The overall outlook for the construction sector remains quite challenging."
