S&P Global Italy Construction PMI: Strongest Drop in New Work in Over Two Years in October

Key Findings:

• Decline in activity loses pace despite steepest fall in new business since August 2024
• Inflationary pressures remain elevated
• Hiring activity picks up, but sentiment turns slightly negative

While the downturn with respect to activity showed signs of easing in October, demand conditions weakened to a sharper degree, according to PMI® data by S&P Global.

The stronger reduction in new work placed at Italian construction firms was the most pronounced in over two years. While ongoing demand weakness weighed on firms’ buying decisions and business sentiment, employment growth was maintained. The conflict in the Middle East continued to cause further issues with supply chains and was a contributing factor behind inflationary pressure.

Up slightly from 46.5 in September, the headline Italy Construction PMI® Total Activity Index — which measures month-on-month changes in total industry activity — posted 47.3 in October. Consistent with a moderate decline in activity, the latest reading was the least marked in three months and far softer than August’s four-year record.

More granular data revealed declines across all three monitored sub-sectors, with the strongest contractions seen for residential and civil engineering. Only the latter indicated a steeper fall compared to September. The overall reduction in work on commercial projects was only slight in nature.

Subdued demand for construction work and instances of poor weather were reportedly factors behind the latest contraction in activity.

October’s decrease in new orders was the strongest in just over two years and the second-most pronounced in 50 months. Economic uncertainty and bureaucracy served to limit client interest, panel member reports showed.

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Constructors in Italy remained in retrenchment mode with respect to purchasing, but still continued to raise employment. Reliance on subcontractors did drop again, however, with firms reportedly hiring staff on fixed-term contracts. Only around 10% of companies raised headcounts, compared to the vast majority that kept them the same (85%).

While the reduction in purchasing activity was noticeably less pronounced than in August and September, it was still elevated compared to the average trend.

Reduced demand for inputs was not sufficient in helping to fully ease supply chain and cost pressures which largely reflected the impact of the conflict in the Middle East. Issues with transportation and stock, capacity pressure at vendors and the ongoing energy crisis were cited as reasons behind the decline in vendor performance. In fact, average wait times lengthened to the greatest degree in more than twoand-a-half years.

Meanwhile, with firms reportedly paying more for a wide variety of key inputs, including raw materials, energy, fuel and oil-derived products, the overall rate of cost inflation remained elevated in October.

Looking ahead, sentiment dropped just inside negative territory for the first time in three months in October. Future demand conditions were a worry among firms amid reports of fewer requests for quotes coming through and due to geopolitical uncertainty.

Eleanor Dennison, Economist at S&P Global Market Intelligence, said, “Beneath the headline index, which suggests the current downturn is easing up, October data signalled one of the weakest readings for new orders in 50 months, with firms also no longer optimistic in their growth expectations. For activity, the downturn remained widespread across all three of the key construction categories monitored, with the most pronounced decline again for residential and civil engineering.

“It is likely that the war in the Middle East and the associated inflationary pressures are key reasons behind subdued demand for construction work and pessimism among companies.

“Without a clear end to geopolitical disruption in sight, the sector looks set to end the year in contraction, with a significant improvement in demand required to avoid this.”

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