German construction sector activity at 29-month high in July

The decline in German construction sector activity softened, with total industry activity falling at its weakest rate in nearly two-and-a-half years in July, purchasing managers' index survey results published by S&P Global showed on Wednesday.

The Hamburg Commercial Bank Germany construction purchasing managers' total activity index rose to 46.3 points in July, the highest since February 2023, from 44.8 in June. Getting closer to the neutral 50-point mark separating growth from contraction, it indicates the pace of decline decelerated in July.

S&P Global said: "The main drag on overall construction sector continued to come from housing activity. The rate of decline in work on residential building projects remained sharp, although it did ease to the weakest in three months. Commercial activity meanwhile showed a modest rate of growth, thereby ending a sequence of contraction stretching back to April 2022. There was a renewed decrease in the civil engineering sector, following the strongest growth in this segment for more than three years in June."

Norman Liebke, economist at Hamburg Commercial Bank, cautioned: "The outlook for Germany's construction sector remains bleak. Not only are construction firms themselves not particularly confident, but new orders, employment conditions, and pricing dynamics also remain subdued. According to anecdotal evidence, new orders continued to decline due to high prices and customer hesitation, which particularly affects residential construction. Employment continued to fall in July, marking a continuous decline over the past 40 months. Input prices rose for the fifth month running, though at a rate that was below the long-term average."

The construction PMI features a panel of 150 companies in Germany, with responses collected between July 10 and 30.

Separately, the Federal Statistical Office reported that new orders in manufacturing fell 1.0% monthly in June, accelerated from May's decline of 0.8%. On-year, new orders in manufacturing rose 0.8% in June in Germany, slowed sharply from 6.1% growth in May.