HCOB Italy Construction PMI: New Orders Rise at Sharpest Rate for Three Months in June

Key Findings:

• Total Activity Index posts just inside growth territory at 50.2
• Stronger growth in new orders fuels greater hiring activity
• Business expectations improve to best in over a year

The Italian construction sector ended the second quarter on a growth footing, having recorded a slight increase in activity that was broadly in line with that seen in May. Little movement in the headline figure concealed noticeable movements at the sector level, however.

The trend for new orders was more upbeat and employment levels were raised at the strongest rate in 15 months. Looking ahead to the next 12 months, companies anticipate activity to rise from present levels. Confidence was at its highest since May last year.

The headline HCOB Italy Construction PMI® Total Activity Index — which measures month-on-month changes in total industry activity — ticked down from 50.5 in May to 50.2 in June.

The reading just remained inside expansion territory and signalled a slight increase in construction activity across Italy. With that, the growth trend was sustained for a fourth month in a row.

Qualitative evidence linked the rise in activity to increased volumes of new business, in part due to the National Recovery and Resilience Plan (NRRP).

At the sub-sector level, there were renewed, albeit only marginal, expansions in both housing and civil engineering activity. The improvement in the latter was the most notable after having been the main source of weakness for nine months straight. Meanwhile, overall growth was constrained by commercial construction activity, which posted its first decline in four months.

Increased interest from clients and the securing of new tenders led to a rise in the overall volumes of new work in June. The increase marked the seventh consecutive month of growth in new orders. The rate of expansion was also the strongest in three months.

With new projects getting underway, companies felt the need to hire additional workers in June. The rate of jobs growth was both the strongest since March last year and elevated by historical standards. At the same time, subcontractor usage rose for the first time in seven months.

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When asked about their expectations for activity for the next 12 months, building firms in Italy were optimistic. The level of confidence was its best in just over a year, having improved in each month since the start of 2025. Growth in new orders and tenders, as well as increased marketing initiatives are expected to support an upturn in activity.

As a result of increased workloads, firms purchased additional inputs in June. Although the increase in buying activity was only marginal, it contrasted with both the long-run trend of contraction and the slight drop recorded in May.

Suppliers were unable to meet orders in a timely manner as increased demand for inputs and stock shortages placed pressure on supply chains. The latest decline in vendor performance was marked, albeit slightly less pronounced than the previous survey period.

Finally, operating costs faced by Italian construction companies continued to rise in June. Panellists reportedly paid more for raw materials, fuel and on duties. Although the rate of input cost inflation was strong, it was noticeably softer than in the previous survey period. There was a similarly marked uptick in subcontractor rates in June.

Commenting on the PMI data, Norman Liebke, Economist at Hamburg Commercial Bank, said, “The Italian construction sector is on the verge of contraction. The headline HCOB Total Activity PMI signalled, with a mere 50.2, that the construction sector is barely able to hold up its current growth trajectory. Overall, there was little movement in the second quarter of 2025. However, there is some hope for the coming months with new orders up at a faster rate and employment levels raised to the strongest degree in 15 months. At the sub-sector level, the commercial construction sector fell short in June.

“Civil engineering and housing are holding the Italian construction sector up. Civil engineering activity returned to growth with the respective index up almost nine points from May. In the past months, civil engineering has been more volatile than in other phases, which is why one should observe if this turnaround persists. Moreover, housing activity rose marginally whereas commercial construction activity fell. Overall, the construction landscape is diverse with different developments. Nonetheless, the HCOB nowcast expects Italian GDP to grow 0.2% in the second quarter of this year where construction should contribute positively to this growth.

“There is hope for the Italian construction sector in the coming months. Business expectations for the next twelve months are building up by reaching the highest level since May 2024. New orders and employment levels are up as well, suggesting that firms are more optimistic and that the market environment for the upcoming second half of the year is looking up.”

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