IHS Markit Italy Construction PMI: Sector Sees Record Rate of Growth During August

Key Findings:

• Total construction activity rises at unprecedented pace…
• … with record expansions recorded in two of three monitored sub-sectors
• Fastest upturn in new work since survey began in 1999

The Italian construction sector recorded unprecedented growth during August, according to the latest PMI® data from IHS Markit. Total activity rose at a pace unseen in the survey’s 22-year history amid a record expansion of order books.

Adjusted for seasonality, the headline IHS Markit Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry output – posted 65.2 in August, rising sharply from July’s reading of 55.8. The latest figure signalled a seventh consecutive monthly expansion in Italian construction activity, with the rate of growth the fastest seen since data collection began in July 1999.

At the sector level, the expansion was broad-based. Housing and commercial activity increased at the fastest rates in the respective series histories, while civil engineering activity rebounded, following a two-month sequence of decline, with the expansion the fastest for nearly three years.

Central to the overall upturn in the sector was a further surge in new orders at construction firms during August. Panellists attributed the latest rise in sales to the government eco- and super-bonus schemes, as well as looser COVID-19 restrictions. Moreover, the rate of expansion in order book volumes was the fastest on record and rapid overall.

Subsequently, Italian constructors continued to raise their buying activity in August, extending the current sequence of greater purchasing which began in February. Notably, the latest increase was the fastest on record and marked.

Supply chain disruption continued into August, however. Average lead times for inputs lengthened sharply, amid widespread reports of material shortages, although delays were the least severe since April.

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Material shortages meanwhile led to a further round of input price inflation during August. Costs rose at the second-fastest pace on record, behind only June, and rapidly overall, with respondents widely citing higher commodity and material costs.

In line with greater activity requirements, Italian construction firms took on additional staff for the seventh month in a row in August. The rate of job creation was the fastest since early2002 and sharp overall.

Companies also raised their usage of sub-contractors at the fastest rate since January 2001 during August. As a result, the availability of sub-contractors fell steeply, while rates charged by subcontractors rose at a pace unseen in the series 22-year history, and one that was rapid overall.

Looking ahead, Italian constructors remained highly optimistic towards activity over the next 12 months. Government tax relief schemes, strong demand conditions and looser COVID-19 restrictions were all cited by panellists as reasons to be confident in August. The level of sentiment remained historically elevated, despite moderating to the lowest since March.

Commenting on the latest survey results, Lewis Cooper, Economist at IHS Markit, said, “Italy’s construction sector recorded a stellar performance during August. Total activity rose at an unprecedented pace, with record rates of growth seen in both the housing and commercial sub-sectors.

“Client demand continued to surge, with firms citing the government super- and eco-bonus schemes as well as looser lockdown restrictions. The latest expansion in new orders was the most marked on record. As a result, companies took on additional staff at an accelerated pace.

“Concerns surrounding supply chains and costs remained, however, as lead times for inputs lengthened sharply and the rate of cost inflation reaccelerated to the second-fastest on record, amid reports of material shortages and higher commodity prices.

“Nonetheless, Italian construction firms remain highly optimistic towards activity over the next year, and with the latest PMI data pointing to a record rate of growth across the sector, we are yet to see signs of any slowdown.”

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