Eurozone construction output contracts the least since February 2023

The HCOB Eurozone Construction PMI rose to 46.0 in April 2025 from 44.8 in March, pointing to a continued decline in construction activity across the currency bloc, though the pace of contraction was the slowest recorded since February 2023.

Eurozone construction output contracts the least since February 2023

While the overall index remained firmly below the 50 threshold that separates growth from contraction, the latest data suggests a tentative improvement in underlying conditions, potentially marking the early signs of stabilization in what has been a prolonged period of sectoral weakness. Notably, this was the 36th consecutive month of contraction, highlighting the entrenched challenges facing the industry amid tightening credit conditions, subdued investment, and soft demand. New orders continued to fall, but the rate of decline eased to its weakest in over a year, offering some encouragement that demand may be bottoming out. Despite this, firms remained cautious, leading to further — though slightly slower — reductions in staffing levels and purchasing activity. Employment fell for a thirteenth consecutive month as firms delayed hiring decisions, citing budget constraints and uncertain project pipelines. Purchasing activity also contracted as companies looked to manage costs more conservatively in the face of patchy workloads and volatile materials pricing.

Input price inflation accelerates

On the cost front, input price inflation accelerated to its highest level since early 2024, driven by rising energy costs, wage pressures, and the impact of tariffs on imported construction materials, particularly from Asia and the US. However, despite this uptick, cost growth remained modest compared to the sharp price surges seen during the post-pandemic recovery. Many construction firms reported that they were unable to fully pass these cost increases onto clients due to competitive pricing pressures and concerns about project affordability, particularly in the residential sector. Encouragingly, supplier delivery times continued to improve, marking the 14th month of easing delays. This improvement reflects further normalization of global supply chains and reduced congestion at key ports, particularly in Southern Europe. The return to more predictable delivery schedules has allowed some firms to improve operational planning and project sequencing, although overall activity levels remain constrained.

Confidence weakens again

Sentiment across the Eurozone construction sector weakened further in April, with expectations for business activity over the next 12 months falling to their lowest level since mid-2022. Many companies cited persistent uncertainty around monetary policy, ongoing trade tensions, and political instability in several member states as factors weighing on their outlook. Confidence was also hampered by weak demand in the housing market, particularly in countries where mortgage affordability remains under pressure due to elevated interest rates. At the country level, Germany's construction downturn eased markedly, with its PMI climbing to a two-year high, helped by a slower fall in new orders and improved material availability. France, however, saw a slight worsening in its already sharp contraction, with firms continuing to struggle with weak demand and rising costs. Italy remained the most resilient among the major economies, with its index hovering around the breakeven point, supported by a modest pickup in commercial construction and stable employment trends. Looking forward, while the data hints at a potential turning point for the sector, much will depend on broader economic conditions, the outcome of ECB rate decisions, and the ability of national governments to implement targeted stimulus measures, particularly for infrastructure and sustainable building projects.