4th March 2021

Key Findings:

Fastest rise in total construction activity since late 2018
Demand conditions improve sharply
Business confidence highest for nearly two decades

The Italian construction sector recorded a steep rebound during February, according to the latest PMI® data. Total activity increased at the quickest rate since late-2018 amid a renewed upturn in new work that was the most marked for more than fourteen years.

The headline figure from the survey is the IHS Markit Italy Construction Total Activity Index. This is a diffusion index that tracks changes in the total volume of construction activity compared with one month previously, and is adjusted for seasonal variations.

February saw the headline index move back above the neutral 50.0 mark from 48.7 in January to signal a renewed rise in Italian construction activity. At 54.8, the latest figure pointed to the steepest upturn in activity since October 2018.

At the sub-sector level, growth was driven by a record increase in housing activity and the first uptick in commercial construction activity for six months. Civil engineering remained a weak spot, with output falling for the second month running and solidly.

A renewed rise in new orders was key to the rebound in the sector during February. Following no change at the start of the year, inflows of new work increased at the sharpest rate since January 2007. Panellists attributed improved demand conditions to the government tax relief schemes.

Subsequently, Italian constructors recorded the first rise in purchasing activity since last September, with the rate of increase in input buying the fastest for over two years.

Demand for inputs continued to strain supply chains, however, with respondents noting ongoing logistical issues due to coronavirus disease 2019 (COVID-19) restrictions. Vendor performance deteriorated further, with the extent of delays remaining severe.

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Price hikes at suppliers, shortages and greater raw material costs led to another round of cost inflation in February. The latest rise in input prices was the most marked for nearly ten years. Sub-contractor charges also rose in February, with the uptick the fastest since last October.

Meanwhile, Italian construction firms registered growth of workforce numbers for the first time in four months. The rate of job creation was only slight, but nonetheless the quickest since November 2019. Companies also reported greater usage of sub-contractors for the first time since August last year.

In line with the improved conditions in the sector, Italian constructors signalled the strongest outlook for activity over the next 12 months since August 2001. Improved client demand and the government tax relief schemes were both cited by surveyed firms as reasons to be confident.

Lewis Cooper, Economist at IHS Markit, which compiles the survey, said, “The Italian construction sector recorded a solid performance during February. Total activity rebounded following a slight decrease in January, with growth the steepest since late2018, as client demand improved sharply. In fact, the upturn in new work was the fastest for more than fourteen years.

“Moreover, there were clear signs that firms were gearing up for growth in the short to medium term. Staff numbers rose for the first time in four months, as companies increased capacity to keep up with current and future demand, while business confidence was the strongest for nearly two decades. Improved client demand and the government tax relief schemes were cited as reasons to be optimistic in February, and it’s clear that firms expect the current positive trends for both activity and new orders to continue.”

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