6th August 2026

Key findings:

Softest fall in activity for four months
Input cost inflation eases to lowest since February
Year-ahead outlook worsens

The start of the second half of 2026 signalled a softer contraction in eurozone construction activity, according to the latest PMI® data from S&P Global.

The rate of decline was the slowest seen for four months, but was still historically sharp and driven by a steeper and marked deterioration in new order intakes. In turn, firms were slightly more pessimistic regarding the outlook for the sector’s activity over the coming year.

Positively, the rapid inflation in input prices seen following the outbreak of the war in the Middle East continued to ease, as cost burdens rose to the least marked extent since prior to the conflict in February.

The S&P Global Eurozone Construction PMI Total Activity Index — a seasonally adjusted index tracking monthly changes in total industry activity — rose from 42.8 in June to 44.3 in July. The latest figure signalled that activity continued to fall sharply, though the rate of contraction decelerated to one that was the softest since March.

The three largest eurozone economies all recorded declines in construction output during July. France registered the strongest decrease, though one that was the softest in five months. Italian firms registered only a marginal contraction, while Germany bucked the easing trend to register the steepest fall in output in three months.

By sector, the latest decrease in construction output was reflected across the three monitored sectors of the report. The commercial sector recorded the strongest overall drop in activity, followed closely by residential construction. Civil engineering activity fell moderately, and at the softest rate in the current six-month sequence.

The continued curtailment of construction activity was primarily attributed to weak demand conditions as evidenced by a marked drop in new orders. The downturn accelerated since the previous month, and came amid a notably stronger reduction in German new business intakes. There was also a robust decrease at French firms. Italy meanwhile saw the first increase in new work since February.

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Overall sentiment in the currency bloc remained in negative territory in the latest survey period, with the degree of pessimism the most pronounced for three months. All three monitored countries registered pessimism, with German firms the most downbeat.

In response to muted demand and output projections, construction firms in the eurozone reduced their payroll numbers at the start of the third quarter. Job shedding was observed for the sixth successive month, but at the softest pace since February. German firms registered a solid and stronger contraction in job numbers, while there was a modest reduction in France. Italy was the only country monitored to record a rise in employment.

Declining requirements impacted constructions firms’ purchasing practices. July saw a sharp reduction in buying activity, and the rate of decline gathered momentum on the month. All three of the eurozone’s largest economies experienced a decrease, with companies in Germany registering the most rapid pace of reduction. At the same time, all three monitored countries saw supplier performance deteriorate sharply, though the latest lengthening of average lead times was the least prominent for four months.

The eurozone construction sector continued to register a robust rise in input prices in July. The rate of cost inflation decelerated further from April’s recent peak, however, to the softest since February. All three countries monitored saw their respective rates of inflation moderate over the month, with France recording the steepest rate overall.

As cost burdens eased, construction firms registered a slower rise in rates charged by subcontractors. That said, subcontractor usage fell markedly again, pushing their availability to the highest in a year.

Usamah Bhatti, Economist at S&P Global Market Intelligence, said, “The construction sector in the eurozone remained in solid contraction territory at the start of the third quarter, with all three monitored sectors continuing the declines seen a month prior. The downturn was also broad-based by nation, as Germany posted a steeper reduction in activity.

“July data saw a further softening in cost pressures, however, as the surge in inflation from rapidly rising energy prices following the war in the Middle East eased further since April’s recent record.

“This did little to dent pessimism in the year-ahead outlook among the bloc’s construction companies, however. The degree of negative sentiment intensified from a month prior, to reach the most pronounced for three months.”

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