The HCOB Italy Construction PMI edged up to 50.5 in May 2025 from 50.1 in April, indicating a second consecutive month of expansion and suggesting that the sector is maintaining a fragile but positive trajectory. While growth remained modest, it marked a contrast to the wider eurozone construction downturn and positioned Italy as a relative outperformer in the bloc.
Italian construction sees modest growth in May
The slight improvement in activity was underpinned by a marginal increase in new orders, largely supported by the rollout of public tenders linked to EU-backed infrastructure initiatives under the National Recovery and Resilience Plan (NRRP), which continues to play a stabilizing role in the industry.
Commercial construction was once again the main pillar of growth, benefiting from a pipeline of retail and office redevelopment projects, particularly in northern urban centers. The segment has shown resilience amid shifting post-pandemic business space requirements and remains bolstered by both domestic and international investment. In contrast, residential construction contracted for the second consecutive month, reflecting a slowdown in private housing demand amid high mortgage rates, declining household purchasing power, and uncertainty around future housing policy incentives. Civil engineering activity also declined, though the rate of contraction moderated from previous quarters, signaling potential stabilization ahead as delayed infrastructure projects begin to mobilize.
Firms increased staffing levels
On the labor front, firms increased staffing levels at the fastest pace seen in 2025 so far, with hiring efforts focused predominantly on permanent contracts—a sign of growing confidence in sustained activity over the medium term. Survey data indicated that companies are looking to secure skilled workers in anticipation of upcoming public and commercial projects, even as some reported challenges with talent availability in specialized trades.
However, purchasing activity slipped slightly as firms turned to existing inventory buffers to meet short-term needs. This cautious approach was largely a response to mounting cost pressures, as input price inflation accelerated in May. Higher costs were reported across a broad range of categories, including raw materials like steel and concrete, energy inputs, and transportation fees. Supplier delivery times worsened for the eighth month in a row, exacerbated by persistent logistical bottlenecks and global supply chain volatility—especially for imported construction components.
Overall confidence improved
Despite these challenges, overall sentiment among Italian construction firms reached a one-year high. Surveyed companies expressed cautious optimism about the 12-month outlook, driven by expectations of increased public sector investment, a more favorable financing environment in the second half of the year, and greater clarity on EU infrastructure funding timelines. While risks remain—including elevated inflation, labor shortages, and geopolitical uncertainty—confidence has been buoyed by a steady inflow of contracts and the perception that Italy is well-positioned to capitalize on regional development funds and structural upgrades.
If this modest momentum is maintained, Italy could continue to act as a stabilizing force in an otherwise weak European construction landscape.
