S&P Global Eurozone Construction PMI®: Steeper Fall in Activity as Inflationary Pressures Bite

Key findings:

• Activity contracts at fastest pace since August 2024
• Sharpest reduction in new orders for 17 months
• Employment falls again as pessimism worsens

Construction firms in the eurozone saw the pace of decline in total activity accelerate in April amid surging inflationary pressure and weak demand.

The decline in April was the most marked since August 2024, as all monitored nations and sub-sectors saw steeper reductions. Moreover, new business volumes fell at the sharpest rate in almost a year-and-a-half.

A key driver of weakness stemmed from a substantial uplift in cost burdens. The rate of input price inflation accelerated from March to reach the highest since October 2022.

The S&P Global Eurozone Construction PMI Total Activity Index — a seasonally adjusted index tracking monthly changes in total industry activity — posted 41.7 in April, down from 44.6 in March to signal a stronger contraction in construction activity that was the most pronounced for 20 months. Total activity has now decreased on a monthly basis for four years.

The steeper fall in construction activity reflected quicker declines across the three largest economies. The fastest decrease in April was seen in France, followed by a considerably sharper reduction in Germany when compared to the prior month. Italian companies also saw a marked contraction that was the strongest since August 2022.

By sector, commercial activity decreased at the sharpest rate of the three sectors and to the greatest extent since May 2020. This was closely followed by the quickest decline in residential construction for five months. Civil engineering activity saw the softest decrease in comparison, but still at the most pronounced rate since February 2025.

In line with the picture for total construction activity, the rate of decline in new orders gathered pace at the start of the second quarter. New business was down for the fortyninth successive month and at the strongest rate since November 2024. New orders fell particularly sharply in France and Germany. Construction new orders in Italy fell at a comparatively weaker pace, but still the fastest since August 2024.

Employment fell for the third month in a row in April, with the rate of job shedding the most prominent in six months. Steep reductions in workforce numbers were recorded in France and Germany, while staffing levels in Italy rose for the twentieth month running.

Constructors decreased their usage of subcontractors again, and at a stronger rate than in March. As a result, the availability of subcontractors continued to increase.

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Higher cost burdens played a large part in the deterioration in the health of the construction sector. The rate of input cost inflation accelerated substantially to reach the highest in three-and-a-half years. Rates of inflation in France and Germany accelerated to 41- and 47-month highs respectively. Meanwhile, the rise in input costs in Italy was the most prominent in four years.

At the same time, construction firms also scaled back their purchasing activity during April. Input buying has fallen continuously on a monthly basis since June 2022. The latest reduction was the strongest since December 2024. Purchasing was down at a quicker pace across all three economies covered.

Although demand for inputs fell, construction firms were faced with a further lengthening of suppliers’ delivery times, the ninth in as many months. Lead times lengthened markedly, with the latest deterioration the strongest since January 2023. Germany posted the most pronounced delivery delays in April.

Eurozone construction firms gave a downbeat assessment regarding the prospects for growth in activity over the coming year, in line with the stronger contraction in output registered in April. Furthermore, the degree of pessimism worsened in April, dropping to a 16-month low.

Similarly pessimistic outlooks were registered in Germany and France, with the former posting the lowest sentiment since December 2024. Italian firms, meanwhile, were only fractionally pessimistic, and less so than in March. 

Usamah Bhatti, Economist at S&P Global Market Intelligence, said, “The start of the second quarter brought a sharp intensification of price pressures, largely in response to rising raw material costs in relation to the war in the Middle East. Higher expenses weighed heavily on the sector and contributed to the sharpest fall in activity levels since August 2024. Moreover, the decline was broad-based across the three sub-sectors and monitored nations.

“Muted demand also played a factor in the malaise, as new work intakes fell to the greatest extent since November 2024. Falling demand was often related to rising price pressures, uncertainty and hesitancy among clients to commit to projects.

“The weakness across the sector weighed on the outlook for activity, with firms signalling the greatest degree of pessimism for 16 months. According to panel members, headwinds to activity included elevated levels of uncertainty and rising inflation, largely stemming from the war in the Middle East.”

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