IHS Markit Italy Construction PMI: Activity Surges Further in December

Key Findings:

• Near-record growth of business activity and new work
• Business confidence ticks up to three-month high
• Rate of input price inflation unchanged from November’s record

The Italian construction sector saw a further surge in activity during December, according to the latest PMI® data from IHS Markit. Business activity rose rapidly again, with growth easing only from November’s peak, amid a near-record rate of increase in new business. Confidence towards activity over the next year meanwhile improved to a three-month high. Elsewhere, price pressures remained unprecedented due to ongoing supply issues.

Adjusted for seasonality, the headline IHS Markit Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry output – fell only slightly from November’s all-time high of 65.5, posting 64.4 in December. This signalled an eleventh straight monthly upturn in Italian construction activity, with growth the thirdfastest on record and rapid.

Moreover, each of the three monitored sectors saw a sustained rise in activity during December, with residential posting the strongest rate of expansion. That said, there was a broadbased easing of growth momentum across the three sectors.

Key to the latest overall upturn was further strong growth of new work at the end of the year, amid reports that the government super- and eco-bonus schemes had boosted client demand. The rate of expansion in new business eased only slightly on the month and remained amongst the steepest on record.

At the same time, constructors continued to expand their workforces during December, stretching the current sequence of higher employment to nearly a year. The rate of job creation was the slowest for five months, but still solid overall. Firms also recorded another rise in their subcontractor usage in December.

With output rising strongly and demand continuing to improve, Italian construction firms recorded more upbeat expectations towards activity over the next year. The level of sentiment rose to a three-month high and was elevated in the context of historical data.

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December data also pointed to a further surge in input buying at construction companies. According to panellists, strong sales and efforts to stave off supply issues drove the latest uplift in purchasing activity.

Strong demand for inputs placed further pressure on supply chains, however, with lead times for building materials and products lengthening sharply again. That said, delays were the least widespread since last August.

Turning to prices, material shortages, transport fees and price hikes at suppliers were all attributed by respondents to a further increase in cost burdens during December. Notably, the rate of input price inflation was unchanged from November’s record high. Cost pressures also came from subcontractors in December. Subcontractor rates rose markedly, although the rate of increase eased from November’s peak.

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said, “The final month of 2021 saw Italy’s construction sector continue on its growth path, with the rate of expansion in business activity easing only slightly from November’s all-time high. Demand conditions remained strong, boosted by the government tax relief schemes, with a near-record expansion in new work.

“Price pressures remained severe, however, as the rate of cost inflation held at November’s peak amid reports of shortages, price hikes at suppliers and greater transport costs.

“Nonetheless, business confidence hit a three-month high as Italian constructors remain optimistic of higher activity over the next 12 months. Indeed, given the stellar performance in December, the sector looks set for further bumper growth in the opening months of 2022, with residential construction remaining a particular bright spot.”

“Nonetheless, business confidence hit a three-month high as Italian constructors remain optimistic of higher activity over the next 12 months. Indeed, given the stellar performance in December, the sector looks set for further bumper growth in the opening months of 2022, with residential construction remaining a particular bright spot.”

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