4th February 2022

Key Findings:

Total Activity Index hits all-time high of 68.2
Record growth of new work
Business confidence picks up to joint-six-month high

Italy’s construction sector registered a record upturn in business activity during January, according to the latest PMI® data from IHS Markit. Inflows of new business surged amid reports of strong demand, in part due to the government super-bonus scheme, with the rate of expansion the strongest since data collection began in 1999. Subsequently, business confidence hit a joint-six-month high and was amongst the strongest on record.

Adjusted for seasonality, the headline IHS Markit Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry output – rose from 64.4 in December to an all-time high of 68.2 in January. This signalled the fastest increase in Italian construction output since data collection began in July 1999 and one that was rapid overall.

Across the three monitored sectors, both residential and commercial posted record rates of activity growth during January, with the former continuing to outperform the construction sector a whole. Civil engineering activity also rose sharply by historical standards, with growth the quickest since May 2001.

The overall surge in construction output in January was driven by a further uplift in new business to Italian constructors. According to survey respondents, strong client demand, due in part to government tax relief schemes, had led to the latest rise. Notably, the rate of expansion in new work was the quickest on record.

With activity rising markedly and a strong pipeline of new work, firms recorded an accelerated pace of input buying during January. In fact, the rate of increase in purchasing activity was the second-quickest since the survey began in 1999.

Strong demand for inputs placed further pressure on supply chains in January, however. Suppliers’ delivery times lengthened sharply again, with panellists also citing transport issues and material shortages as causes of longer lead times. That said, delays were the least widespread since last August.

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Turning to prices, cost burdens continued to rise sharply in January. Material shortages, price hikes at suppliers and higher raw material costs were all cited in anecdotal evidence as drivers of inflation. The rate of increase eased from the record highs at the end of 2021, but remained rapid overall. Cost pressures also came from subcontractor pay rates in January, which rose steeply again.

January data also pointed to further job creation at Italian constructors, extending the current sequence of rising employment to a year. Respondents attributed the latest rise in payroll numbers to higher workloads. The rate of increase was solid, albeit the slowest since last July. Italian construction firms also registered a further solid rise in subcontractor usage in January.

Looking ahead, companies held a strongly optimistic outlook towards activity over the next 12 months in January. In fact, the level of sentiment ticked up to a joint-six-month high (level with September 2021) and was elevated in the context of historical data. Strong demand, rising workloads and government tax relief schemes were all cited in anecdotal evidence as reasons to be confident.

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said, “Italy’s construction sector recorded a bumper start to 2022, as activity and new work increased at the fastest pace on record amid reports of surging demand, due in part to the government super-bonus scheme. Notably, two of the three monitored sub-sectors registered record rates of growth in January, led by residential, while civil engineering construction rose at the quickest rate since May 2001, highlighting the broad-based surge in Italian construction activity.

“Firms subsequently registered a stronger outlook towards activity over the next year, with sentiment the jointstrongest since last July, while the rate of job creation remained strong.

“Headwinds came from inflationary pressures and supply chain issues, with panellists citing material shortages and rising prices as a result, although the rate of cost inflation slowed sharply from the highs at the end of last year and supply delays were the least widespread since last August to provide some further promising news.

“Overall, the sector saw the best performance in over 22 years of data collection in January, setting the stage for further strong growth over the coming year.”

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