4th March 2021

Key Findings:

Decline in new orders quickens
Employment levels fall at marginal pace
Business sentiment improves for fourth consecutive month

The IHS Markit Eurozone Construction PMI® is compiled by IHS Markit from responses to questionnaires sent to purchasing managers in a panel of around 650 construction firms in the eurozone. The headline figure is the Total Activity Index, which tracks changes in the total volume of construction activity compared with one month previously.

The IHS Markit Eurozone Construction Total Activity Index ticked up from 44.1 in January to 45.0 in February, indicating a softer, albeit solid decline in construction activity. The latest contraction meant that eurozone construction activity has now declined for a full year, as companies continued to note the impact of the coronavirus disease 2019 (COVID-19) pandemic on construction projects as well as reduced order volumes. The downturn was broad-based across the three monitored subsectors, with the sharpest decline recorded in civil engineering activity, followed by commercial construction.

Work undertaken on housing by eurozone construction firms decreased further in February. The decline marked the twelfth consecutive monthly fall in activity although the pace of contraction eased slightly from that seen in January. That said, the reduction remained solid. A robust improvement in Italian home building activity was offset by marked contractions in France and Germany, with the latter falling at the sharpest pace since May 2020.

Meanwhile, commercial construction activity contracted again in the latest survey period. Yet, the pace of the decrease eased slightly from January, and the softest recorded since September 2020. A rapid fall in commercial activity in Germany and a solid decline in France contributed to the contraction in the bloc as a whole. However, firms in Italy signalled a renewed expansion in commercial building.

The downturn in eurozone civil engineering activity continued in February, as work undertaken on infrastructure projects contracted sharply. The rate of decline was the quickest since Decline in new orders quickens Employment levels fall at marginal pace Business sentiment improves for fourth consecutive month May 2020, and the fastest among the monitored sub-sectors. The pace of decline in both France and Germany remained marked, while the rate of decrease in Italian civil engineering work was broadly in line with the historical average.

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February data pointed to a rapid fall in German construction activity, the fastest recorded since last May. Activity in France also reduced further although the pace of decline was the softest for five months. On the other hand, Italian firms signalled the sharpest expansion in activity since October 2018.

New business received by eurozone construction companies continued to fall in February. Moreover, the pace of the contraction accelerated and was the fastest since November. Panellists often attributed weaknesses to the ongoing impact the COVID-19 pandemic had on calls for tender. This weakness was most acute in France where orders fell at their fastest pace for three months. At the same time, German firms reported the quickest fall since last October. Meanwhile, Italian firms reported the strongest rise in order book volumes since January 2007.

Employment levels among eurozone constructors decreased further in the latest survey period. That said, the pace of job shedding eased and was marginal overall. On a national basis, workforce numbers in France and Italy increased at a marginal pace, but German firms indicated a modest fall in staffing levels.

Despite activity and order books remaining subdued, eurozone construction companies signalled stronger optimism regarding the outlook for activity over the coming 12 months. This marked the second successive month of positive sentiment among the bloc’s constructors, and was the strongest recorded since February 2020. Both Italian and French firms indicated stronger confidence in February, with the former at the highest level since August 2001. Projections in Germany remained subdued, however.

Commenting on the latest results, Usamah Bhatti, Economist at IHS Markit, said, “Eurozone construction firms reported a sustained downturn in activity during February. Meanwhile, incoming business fell at the fastest pace since November as appetite for new construction projects remained subdued. With activity and sales falling further, firms across the bloc reduced employment levels once again, extending the current period of job shedding to 12 months. That said, the pace of decline was only marginal and the softest in the current sequence. Moreover, eurozone constructors were increasingly optimistic about the year-ahead outlook for activity, as confidence rose to its highest level since February 2020. Positive sentiment was underpinned by hopes that the pandemic would recede further and induce a wider recovery in both private and public sector construction. By country, France and Germany continued to report further declines in construction activity, with the latter signalling the steepest fall since May 2020. Meanwhile, Italian firms registered the strongest rate of activity growth since October 2018.”

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