IHS Markit Italy Construction PMI: Activity Increases at Record Pace in November

Key Findings:

Activity Increases at Record Pace in November

• Total Activity Index hits all-time high of 65.5, up from 58.6 in October
• New business surges further, with growth running close to record pace
• Cost pressures hit fresh series peak

Italy’s construction sector recorded a survey-record rate of growth during November, according to the latest PMI® data from IHS Markit. Total activity increased at the fastest rate since data collection began in 1999, while the pace of expansion in new work was only just below August’s recent peak and rapid overall, amid reports of strong demand conditions due to the government super- and eco-bonus tax relief schemes. Price pressures meanwhile hit a fresh series high amid reports of material shortages.

Adjusted for seasonality, the headline IHS Markit Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry output – hit an all-time high of 65.5 in November, rising sharply from 58.6 in October. This signalled an uplift in Italian construction output for the tenth month in a row, with growth the fastest on record and rapid overall.

Moreover, the expansion was broad-based across the three monitored sub-sectors during November. Residential continued to lead the rankings, followed by the commercial sector, where growth accelerated to the second-fastest on record and was marked. Meanwhile, civil engineering activity rose at the steepest pace since May 2001 and sharply overall.

Central to overall growth in November was a tenth straight monthly increase in new business at Italian constructors. Strong demand conditions, in part due to government tax relief schemes, drove the latest rise according to panellists. Moreover, the rate of growth in new work was the secondquickest on record, slower than only that seen in August.

Subsequently, Italian firms continued to raise their input buying in November, with the latest uplift the second-fastest since data collection began in 1999. Strong demand for inputs placed further strain on supply chains, however, as vendor lead times lengthened to a record degree amid reports of material shortages and logistical issues.

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Shortages also contributed to a further surge in cost pressures midway through the fourth quarter. The rate of inflation hit a survey record for the second month in a row and was rapid overall. Stronger cost pressures also came from subcontractor rates, which rose at the quickest pace in the series history.

November data also pointed to another increase in staffing levels at Italian construction firms, extending the current sequence of higher employment which began in February. According to anecdotal evidence, strong demand had led firms to take on additional staff. The rate of job creation was the quickest for nearly 21 years and marked. Companies also increased their usage of subcontractors sharply in November.

Looking ahead, Italian constructors maintained an optimistic outlook towards activity over the next 12 months. The level of sentiment ticked up since October, with confidence attributed to strong demand conditions and hopes of a sustained economic rebound. That said, optimism remained among the weakest in 2021 so far, with concerns around inflationary pressures and the pandemic weighing on the outlook.

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said, “Italy’s construction sector saw a further rapid uplift in growth during November, with building activity rising at the fastest pace in over 22 years of data collection and rates of increase accelerating in each of the three monitored sub-sectors.

“A strong pipeline of new work amid the government super- and eco-bonus tax relief schemes was the key driver of the upturn in November, according to panellists, as the rate of expansion in new work ran only just below August’s record high. As a result, firms took on staff at the sharpest rate since February 2001.

“This suggests that the Italian construction sector is set for bumper growth during the fourth quarter as a whole, and with no signs of the rebound losing steam, firms remained upbeat towards output over the next 12 months, although record price pressures did weigh slightly on business confidence.”

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