IHS Markit Italy Construction PMI: Rate of Expansion in Activity Hits Fresh Survey Record in February

Key Findings:

• Growth of activity and new work hit fresh peaks
• Uplift in buying activity fastest on record
• Firms take on additional staff at quickest pace for 21 years

The Italian construction sector registered another month of bumper growth in February, according to the latest PMI® data from IHS Markit. For the second time in as many months, both construction activity and new work rose at survey record rates, with panellists citing improved client demand, driven primarily by government tax relief schemes. A strong pipeline of new work also spurred firms to raise their purchasing activity at the fastest pace on record in February, while efforts to expand capacity contributed to a further round of job creation. Notably, the rate of increase in employment was the steepest for 21 years.

Adjusted for seasonality, the headline IHS Markit Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry output – hit an all-time high of 68.5 in February, surpassing January’s peak of 68.2, to signal the quickest expansion in construction output since data collection began in July 1999.

Moreover, the upturn remained broad-based across the monitored sectors in February. Residential construction activity increased at a survey record pace for the second time in as many months, while the rate of growth in commercial activity held close to January’s peak. The civil engineering sector meanwhile registered a seventh consecutive rise in activity, the longest sequence of growth since 2002.

Driving the overall uplift in February was a further rise in new business to Italian construction firms. Notably, growth on this front accelerated to a fresh series high and was rapid overall.

According to panellists, improved demand conditions were principally due to the government super-bonus scheme.

A strong pipeline of new work led firms to increase their input purchasing in February. Buying activity rose at the fastest rate on record.

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Greater demand for inputs placed further strain on supply chains, however, as lead times for purchases lengthened sharply again amid widespread reports of material shortages. That said, delays were the least severe for six months.

Concurrently, Italian constructors reported a further upturn in employment midway through the first quarter. The rate of job creation was the fastest for 21 years and marked overall. Firms also registered a near-record increase in subcontractor usage during February.

On the cost front, input prices increased in February, as has been the case in each month since June 2020. Survey respondents attributed the latest rise in cost burdens to greater energy, raw material and transport costs. The rate of inflation accelerated since January and was amongst the steepest on record. Cost pressures stemmed also from a further sharp increase in subcontractor rates in February.

Finally, construction companies maintained an optimistic outlook towards business activity over the next year in February. Confidence was linked to strong demand conditions and the extension of the super-bonus scheme. Although strong, the level of sentiment moderated on the month and was weaker than the average over 2021.

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said, “The latest PMI data pointed to a further round of bumper growth across the Italian constructions sector, with both business activity and inflows of new work rising at survey record rates for the second month running, amid reports of surging demand due to the government’s super-bonus scheme.

“Subsequently, firms raised their input purchasing at the quickest pace on record, while the rate of job creation accelerated to a 21-year high.

“Supply chains remained under pressure in February, amid widespread reports of material shortages, although delays were the least widespread for six months. As a result, cost pressures remained amongst the strongest on record, with respondents attributing the latest surge to greater material, transport and energy costs.

“Companies remained highly optimistic towards activity over the next year as firms’ anticipate the extension of the super-bonus scheme in particular will keep demand strong. With the latest data suggesting that growth momentum has accelerated further, the Construction PMI looks set to post its strongest quarterly performance on record should the current trend be sustained into March.”

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