S&P Global Italy Construction PMI: Sustained Contraction of Sector Output Despite Fresh Growth in Orders

Key Findings:

• Construction activity down again, but only marginally
• First rise in new orders in five months triggers job creation
• Cost pressures soften, but outlook declines

The trend of decline in construction activity in Italy extended into the third quarter. However, renewed growth in new orders and construction jobs acted to soften the fall.

The commercial sub-sector was the bright spot in July, posting its first increase in activity in five months, while housing and civil engineering were drags on overall construction activity. Input purchasing was lowered again in line with the dip in activity and amid elevated cost and supply chain pressures. Despite the turnarounds with respect to new work and employment, firms foresee a fall in output over the coming year.

The headline Italy Construction PMI® Total Activity Index — which measures month-on-month changes in total industry activity — rose from 45.4 in June to 49.1 in July.

Although marking the fifth consecutive month of contraction, the latest decrease in construction activity slowed to just a modest rate. Renewed growth in commercial building activity cushioned the fall, while the rates of decline across both housing and civil engineering softened.

Input requirements were lower as a result, triggering a fourth fall in buying levels in five months in July. The reduction was modest overall, however.

There were greater signs of stability in demand in July, as indicated by a fresh increase in new orders placed for construction work in Italy. Panellists reported winning bids as well as a pick-up in customer interest. Although only slight overall, this was the first improvement since February.

Meanwhile, June’s blip in employment appeared to be shortlived, as signalled by a fresh increase in Italian construction sector jobs in July. Excluding June, this was the weakest rate of job creation the sector has seen in 2026 so far and only marginal, however. At the same time, firms reduced their usage of subcontractors once again.

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Italian constructors were negative in their assessment for future activity levels in July. Around 22% of companies expect a fall in output over the next 12 months, attributed to uncertainty around geopolitics and the end of construction bonuses. This was one of the most downbeat forecasts since August 2022, in line with that seen in March.

The war in the Middle East continued add upward pressure to cost burdens facing Italian building companies in July. Of the almost 28% to signal higher costs, they widely reported paying more for raw materials, oil and energy. Although still substantial, the rate of inflation was the least marked since February, however.

Ongoing disruption to supply chains was signalled in July, as wait times on inputs lengthened again amid issues with stock availability and logistics as well as transport delays. Although this marked almost two years of uninterrupted decline in vendor performance, the recent spell of disruption has been more pronounced than seen at the start of the year.

Eleanor Dennison, Economist at S&P Global Market Intelligence, said, “The headline reading is evidence of underlying weakness across the Italian construction sector in July. In particular, the mood among companies is downbeat as we enter the second half of the year. Uncertainty around geopolitics, demand conditions and a lack of government incentives were reasons for firms’ negative assessment. At the same time, the cost environment and supply chain pressures remain difficult to navigate.

“Although the sector remained in contraction, things appear to be moving in the right direction. The fall in activity was far softer than in June, with all three subsectors showing relative improvements over the month. Work on commercial projects even increased for the first time since February. This coincided with a fresh, albeit only marginal, injection of new work across the sector in July.”

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