6th December 2022

Key Findings:

Renewed uplifts in activity and new orders
Rate of cost inflation weakest since January 2021
Business confidence hits six-month high

Italy’s construction sector returned to a growth footing in November. Total activity rose for the first time since June and at the quickest pace for six months amid a renewed uplift in new orders. Consequently, firms recorded a further monthly uplift in business confidence, with sentiment the strongest since May.

Elsewhere, input costs continued to increase in November, though the rate of inflation was the weakest since January 2021.

The headline S&P Global Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-onmonth changes in total industry activity – rose from 48.1 in October to 52.0 in November to signal the first increase in construction activity since June. Moreover, the rate of expansion signalled was the quickest for six months.

At the sector level, the upturn was broad-based in the penultimate month of the year. Output returned to growth in the commercial and civil engineering sectors, with the former registering the strongest rate of increase across the three monitored. Meanwhile, residential construction rose for the second month running, with the expansion accelerating to a modest pace.

Driving the fresh uplift in total activity in November was the first increase in order book volumes since May. Panellists attributed the rise to improved client demand. The rate of expansion in new work was moderate overall.

Meanwhile, Italian constructors also registered the first increase in staffing levels for five months during November. According to respondents, the uplift in workforce numbers was in response to stronger demand conditions and greater workloads. The rate of job creation was weaker than those registered earlier in the year, however, and mild.

The stronger demand environment was also attributed to a renewed rise in purchasing activity in November. Input buying increased for the first time since June and modestly.

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November data signalled ongoing pressure on supply chains, however, as average lead times for inputs lengthened further. Panellists linked delays to shortages of materials and transport issues. That said, lead times lengthened to the smallest extent for three months.

On the price front, costs faced by construction firms continued to rise in November, stretching the current sequence of inflation to two-and-a-half years. Greater energy and material costs were cited as the primary drivers of inflation. Although still amongst the quickest on record, the pace of increase was the slowest since January 2021. Subcontractor rates also reportedly rose in November, with the rate of increase cooling slightly on the month but remaining amongst the most marked in the series history.

Looking ahead, November data pointed to a stronger degree of optimism amongst Italian construction firms towards activity levels in 12 months’ time. Confidence was linked to hopes of improved demand conditions and new construction projects. Notably, the level of positive sentiment climbed to a six-month high.

Lewis Cooper, Economist at S&P Global Market Intelligence, said, “Italy’s construction sector returned to a growth footing in November, as total activity increased for the first time in five months and at the quickest pace since May. Moreover, the upturn was broad-based across the monitored sectors, led by commercial construction.

“November data also highlighted positive news with respect to demand, as inflows of new work increased for the first time since May and moderately overall. Consequently, firms recorded a fresh upturn in staffing levels.

“Business confidence also improved in the penultimate month of the year, with optimism attributed to hopes of improved demand conditions and new construction projects. Notably, The Future Activity Index hit a sixmonth high and posted slightly above the series long-run average, to signal historically strong confidence amongst firms.”

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