S&P Global Germany Construction PMI®: Activity Falls Further in October as Inflationary Pressures Ramp Up

Key findings:

• Total Activity Index slips to 41.6 in October, lowest since March 2025
• Input cost inflation jumps to four-month high
• Subdued order books and high borrowing costs weigh on business expectations

The fourth quarter began with a deepening decline in total activity across the German construction sector, the latest S&P Global PMI® survey data showed. Work fell in each of the broad building categories monitored, albeit with civil engineering activity continuing to show the softest contraction.

The sustained downturn in activity coincided with a further intensification of cost pressures, with constructors reporting the fastest increases in both purchase prices and subcontractor rates seen since the second quarter. Looking ahead, there was pessimism towards the outlook for activity, reflecting a lack of new orders and high interest rates.

The S&P Global Germany Construction PMI Total Activity Index is a seasonally adjusted index based on a single question asking about month-on-month changes in total industry activity. A reading below 50.0 signals contraction, and the further below 50.0 the faster the rate of contraction signalled.

The Total Activity Index fell for the second month running in October, taking it further from August’s recent high. At 41.6, down from 43.5 in September, the latest reading was in fact the lowest since March 2025.

The main drag continued to come from the housing sector, which once again recorded a rapid rate of contraction, albeit one that was slower than that seen the month before. Work on commercial building projects also fell sharply, registering its steepest pace of decline since July. Civil engineering posted the softest decrease, but its performance was nevertheless the worst recorded for nearly two years.

The latest survey results continued to point to challenging demand conditions across the construction sector. New orders fell steeply and to the greatest extent for six months, amid reports from surveyed firms of a lack of tender opportunities, pressure on client budgets and customers adopting a wait-and-see attitude.

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These headwinds to demand, combined with concerns over high long-term interest rates, weighed on firms’ expectations for activity in the coming year. The degree of confidence signalled in October was in fact the lowest since May.

Employment continued falling across the German construction sector at the beginning of the fourth quarter, as has been the case in each month since February. The pace of job shedding eased to the weakest since June, although it was still solid overall and slightly quicker than the average over the current sequence of staff retrenchment.

Constructors’ purchasing activity likewise fell at a slower rate in October, but one that was still solid by historical standards. Despite the reduction in demand for building materials and products, lead times on purchases lengthened to the greatest extent for four months as firms remarked on supply shortages across the market.

Average prices paid for purchases meanwhile rose sharply. The rate of inflation accelerated notably and for the third month running, reaching its highest since June. Reports from surveyed firms highlighted the influence of renewed upward pressure on energy prices and the cost of oil-derivatives. Rates charged by subcontractors meanwhile posted the second-sharpest rise in almost four years. This was despite building companies recording a sustained decline in subcontractor usage.

Phil Smith, Economics Associate Director at S&P Global Market Intelligence, said, “The latest PMI figures continued to paint a negative picture of the health of the German construction sector, showing not only subdued activity and new orders, but also an intensification of cost pressures and more supply delays.

“We’re perhaps continuing to see some payback from the better performance seen in August, but the fact that expectations for the year ahead remain pessimistic highlights that problems run deeper, with high long-term interest rates and elevated building costs just two of the fundamental headwinds facing the sector.

“Input price inflation has continued to accelerate, driven by increased energy costs, which continue to face upside risks in the event of any flare-up in the Middle East conflict.”

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