Italian construction sector activity stalls in March

The HCOB Italy Construction PMI dropped to 50.1 in April 2025 from 52.4 in March, indicating that activity in the sector had all but stalled following the previous month’s solid rebound.

Italian construction sector activity stalls in March

The latest reading reflected near-stagnant growth, as modest expansions in output and new business were offset by rising headwinds, particularly from supply chain disruptions and broader economic uncertainty. Both new orders and purchasing activity saw only marginal increases, suggesting that demand is stabilizing but remains fragile. Project pipelines were increasingly reliant on a small number of commercial initiatives, highlighting imbalances across subsectors. Commercial construction remained the sector's outperformer, expanding for the second consecutive month on the back of new retail and office space developments in Milan and Rome. In contrast, residential building activity declined again amid weak consumer sentiment, tighter credit conditions, and a slowdown in renovation demand following the phaseout of tax incentives. The civil engineering segment posted the sharpest contraction in eight months, largely due to delays in public infrastructure spending and municipal budget constraints. Despite the broader deceleration, employment in the construction sector rose at the fastest pace seen so far in 2025. Firms reported hiring to meet capacity needs for newly awarded projects, particularly in commercial construction. However, the majority of these new roles were fixed-term contracts, reflecting employers’ cautious outlook and a desire to maintain flexibility in case of further market disruptions.

Supply chain issues persist

Supply chain issues persisted, with longer lead times for key materials such as insulation, concrete, and steel. Contractors attributed the delays to ongoing global logistical bottlenecks, as well as import uncertainty driven by the evolving tariff standoff between the US and EU. As a result, some firms reported having to re-sequence project schedules or operate below planned efficiency levels. Meanwhile, cost inflation remained elevated but stable, as rising wage pressures and sustained input prices kept operating costs high. Still, firms refrained from aggressively passing on these costs to clients due to heightened price sensitivity in the market. Sentiment among Italian construction companies edged higher on the back of recent contract wins and a slight improvement in financing conditions, though overall business confidence remained muted relative to historical averages. Looking ahead, expectations for additional rate cuts by the European Central Bank later in the year provided a potential tailwind for the industry, with the possibility of improved access to credit and stronger investor appetite for new construction. However, firms remain wary of downside risks tied to global trade uncertainty, persistent inflation, and uneven recovery across the broader Eurozone economy.