S&P Global Eurozone Construction PMI®: Steeper Fall in New Orders Drives Sharper Decline

Key findings:

• New orders contract at fastest pace since April
• Employment falls again as outlook remains pessimistic
• Cost pressures continue to soften

Construction firms in the eurozone saw the pace of decline in total activity accelerate in August amid a sharper contraction in new business.

New order intakes decreased at the quickest rate in four months, while all three monitored sub-sectors saw sustained falls in activity midway through the third quarter.

At the same time, there were sharp reductions in both employment and purchasing, and cost inflation remained historically marked despite easing to a six-month low.

The S&P Global Eurozone Construction PMI Total Activity Index — a seasonally adjusted index tracking monthly changes in total industry activity — posted 43.0 in August, down from 44.3 in July to signal a stronger contraction in construction activity midway through the third quarter. Total activity has now decreased consistently for 52 months.

The steeper fall in construction activity reflected an accelerated decline in France that was the most pronounced since May 2020, while Italian firms saw the fastest contraction for four years. German companies meanwhile bucked the downward index level trend to register its softest reduction in 2026 to date.

By sector, housing activity decreased at the sharpest rate , followed closely by commercial construction. Civil engineering activity saw the softest decrease of the three, but one that was still solid overall.

In line with the picture for total construction activity, the rate of decline in new orders gathered pace during August. New business was down markedly and at the strongest rate since April. New orders fell notably sharply in France, while there was a renewed and solid drop in Italy. Construction orders in Germany declined at a softer rate than that seen in July, but at one that was still substantial.

Employment moderated for the seventh month in a row in August, with the rate of job shedding the most prominent in four months. Steeper reduction in workforce numbers were recorded in France and Germany, while staffing levels in Italy rose for the second successive month.

Eurozone constructors decreased their usage of subcontractors again, and at a marked rate. As a result, the availability of subcontractors rose, though the rate of increase was only modest.

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Higher cost burdens continued to weigh on the construction sector. The rate of input cost inflation eased further from April’s peak to reach a six-month low, but remained well above the series average. The rise in input costs in Italy slowed on the month, contrasting with a slight acceleration in input cost inflation in both Germany and France. In line with this trend, the rise in subcontractor rates was the softest since February.

At the same time, construction firms also scaled back their purchasing activity during August. Input buying has fallen continuously on a monthly basis since June 2022. The latest reduction was unchanged from July. French and German firms saw softer decreases in input buying, contrasting with the sharpest fall in purchasing activity since January 2023 in Italy.

While demand for inputs fell, constructions firms continued to face a further lengthening of suppliers’ delivery times, the thirteenth in as many months. Lead times lengthened solidly, though the latest deterioration was the softest since February.

Eurozone construction companies gave a downbeat assessment regarding the prospects for activity growth over the coming year. The degree of pessimism was unchanged from July’s three-month record.

French companies posted the most pessimistic outlook, posting the weakest level of sentiment since April. German firms also posted a markedly downbeat outlook. Firms in Italy meanwhile registered the most positive outlook for six months. 

Usamah Bhatti, Economist at S&P Global Market Intelligence, said, “August data revealed a sharper downturn in construction activity, largely in response to a steeper deterioration in demand conditions. New business intakes fell at the quickest pace in four months, with the decline broad-based across the monitored nations. Moreover, the three sub-sectors of construction also remained firmly in contraction territory, again led by housing.

“Weakness across the sector weighed on the outlook for activity, with firms signalling pessimism regarding the year ahead. According to panel members, headwinds to activity stemmed from inflationary concerns and the war in the Middle East. Companies will take heart from the fact that overall cost inflation trended downwards again to reach a six-month low, however.”

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