6th March 2025

Key Findings:

First drop in activity for three months
Marginal growth of new business signalled
Rate of input price inflation at 12-month high

February HCOB PMI® data saw an end to a brief period of expansion, as construction activity in Italy returned to contraction territory. The downturn came despite sustained growth in new business, though the uptick was only marginal in nature. Meanwhile, input costs rose at a stronger rate on the month, with upward pressures from increased raw material prices and supplier charges.

Positively, firms felt confident enough to continue to increase their payroll numbers in the latest survey period and expressed greater optimism toward future activity.

The headline HCOB Italy Construction Purchasing Managers’ IndexTM (PMI®) – posted at 48.2 in February, down from 50.9 in January.

Activity levels were down in the latest survey period, reversing the short run of growth seen in the previous two months. Activity was reportedly limited by bureaucracy and subdued inflows of new work, according to panel member reports. That said, the rate of contraction was only modest overall.

All three monitored sub-sectors recorded declines in activity in February for the first time in four months. After a strong performance at the start of the year, housing activity dropped solidly over the month. The commercial and civil engineering sectors recorded sustained, but softer rates of decline compared to January, with activity in the former nearing stabilisation.

Reflective of new business and tender wins, Italian construction firms signalled a third rise in new orders in successive months in February. Though growth of new business remained only mild, latest data pointed to a robust increase in the context of historical data.

With new business growth sustained, Italian constructors continued to hire new site workers in February, marking the sixth month in a row in which workforce levels had been raised. The rate of jobs growth was faster than in January, but still only marginal overall.

While activity was down and incoming new orders were up only slightly, firms showed some reluctance to purchase inputs in February. The reduction in buying activity was only fractional, however.

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Nevertheless, delivery times on inputs were longer and cost pressures rose in February. However, supplier performance deteriorated to a lesser degree than in January. At the same time, the rate of input price inflation was its most pronounced for a year and sharp overall. Increased price lists at suppliers and raised raw material costs were cited as the key drivers.

On balance, firms remained confident that activity would rise from current levels, with positive sentiment pinned on new business wins and a forecast pick-up in demand. Here, the optimists outweighed the pessimists 31% to 22% and the degree of positive sentiment was its strongest for five months. That being said, in the context of the series history, sentiment was relatively subdued.

Commenting on the PMI data, Dr Tariq Kamal Chaudhry, Economist at Hamburg Commercial Bank, said, “Italy disappoints the eurozone. After two months of slight growth, the HCOB Construction Sector PMI fell into contraction territory in February, joining the other major eurozone economies. While civil engineering activity shrank at the fastest rate, the index for residential construction activity saw the biggest setback compared to the previous month. Commercial activity is only marginally in contraction. The current weakness of the Italian construction sector can be attributed to the expiration of key support programs (such as the Superbonus), general economic uncertainty, and persistent bureaucratic hurdles. These factors significantly hinder investments and delay construction projects.

“Prices are rising faster. Subdued demand is met with further increases in input prices. Participants reported higher raw material costs and increased price lists at suppliers. Interestingly, even subcontractor rates are steadily rising. However, a look at the subindex for subcontractor usage suggests that rate increases could soon cool down.

“The outlook is not so dramatic. Surveyed companies remain hopeful, which is exceptional compared to other major European states. Italian construction firms continue to receive orders, albeit at a mild pace. The Future Activity Index is higher than in the previous month, but remains below the historical average. Expected new orders and already secured deals contribute to the positive sentiment. This keeps employment in the construction sector active. Respondents linked the increase in employment levels to the heightened workload.”

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