6th May 2021

Key Findings:

Total activity rises at fastest pace since January 2007…
… with growth accelerating in each of the three monitored sectors
Costs increase at record pace amid worsening supply disruption

Latest PMI® data from IHS Markit highlighted a further upturn in the Italian construction sector during April, with total activity rising at the fastest pace since January 2007 amid surging new orders.

Worsening supply delays continued to impact the sector, however, with cost burdens rising at the fastest rate on record amid material shortages.

Adjusted for seasonality, the headline IHS Markit Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry output – posted 57.6 in April, rising from 56.3 in March, and signalled the strongest increase in Italian construction activity since January 2007.

The upturn was broad-based across the three construction categories monitored by the survey in April. Residential again saw the fastest rise, with output growth the steepest in the series history, while commercial activity rose at the quickest pace since February 2007. The civil engineering segment also saw faster output growth than in March, although the rate of expansion was only marginal overall.

Central to the upturn in total activity in April was a further increase in new orders, which rose at the second-fastest pace since the opening month of 2007 and steeply overall. According to panellists, growth was driven by the government’s ecobonus and superbonus schemes, as well as improved client demand and the reopening of some construction sites.

Subsequently, Italian constructors continued to increase their staffing levels in April. Despite easing, the rate of job creation was solid overall. Firms also upped their usage of sub-contractors further during April.

Strong sales also led to a further rise in purchasing activity during April, with the latest uptick the fastest for over 14 years.

Increased demand for inputs continued to strain supply chains in April, however. Average lead times for building materials and products lengthened again, with delays the third most severe on record. According to anecdotal evidence, longer delivery times were the result of material shortages and logistical problems.

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At the same time, cost burdens continued to increase, with the latest rise in input prices the greatest on record. Increased material prices, particularly those used in upgrading the energy efficiency of homes through the superbonus scheme, as well as shortages, were the primary drivers of cost inflation, according to panellists.

Greater costs also stemmed from the usage of sub-contractors, as rates charged by sub-contractors rose markedly again in April. This was driven in part due to a tenth straight monthly reduction in their availability.

Looking ahead, Italian construction companies remained highly optimistic towards activity over the next 12 months during April. The level of positive sentiment was the strongest since September 2001, with confidence attributed by panellist to improved demand conditions, government tax relief schemes and hopes of a solid economic recovery.

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said, “Italy’s construction sector continued to steam forward into a recovery during April. Activity rose at the strongest rate since January 2007, with all three sectors seeing faster growth. Demand remained strong too, as inflows of new business expanded at the second-quickest rate for over 14 years, beaten only by the upturn in new work during March.

“A key concern, however, is mounting cost pressures. April data showed the steepest rise in input costs since the survey began in 1999, driven in part by more intense supply disruptions, as well as greater material costs, particularly those used in improving the energy efficiency of homes, according to respondents.

“Nonetheless, the superbonus scheme was again cited as a key driver of output growth and higher sales during April, as well as the strongest level of business confidence since September 2001. With the scheme extended until 2023, the construction sector should continue to reap the benefits, and there are no signs yet of any slowdown in the recovery.”

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