German construction sector suffers the effects of long Covid

Germany’s construction sector suffered its eighth consecutive monthly contraction in October according to survey data from economic consultant IHS Markit.

IHS’ Purchasing Managers’ Index fell to 45.2 in October, the biggest fall since June. A result of 50 indicates no change.

Lower levels of activity were recorded across the commercial and civil engineering categories in October. The former contracted at a slower rate than September, but the latter recorded its steepest decline since July.

Housing activity was the only category to record growth, rising for the fourth month in a row, albeit only modestly.

The contraction was due to a decline in orders, as clients held off from making capital investments. The survey also found that construction companies’ sentiments worsened for the second straight month, reaching their lowest point since May, and this led to further cutbacks in employment and purchasing activity.

To make matter worse, IHS’ cost data showed an increase in average prices for materials and products, and the largest rise in subcontractors’ prices since March.

Phil Smith, principal economist at IHS Markit, said the pandemic continued to weigh on demand for building work, and constructors had turned more pessimistic about the outlook for activity over the coming year owing to its impact on businesses, households and local authorities alike.

He commented: "This suggests the pandemic’s impact on the construction sector is set to linger on."

Image: One bright spot for Germany’s civil engineering sector is the start of work on the 18km Fehmarn Belt tunnel to Denmark (Femern A/S)

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