Latest economic reports reveal desperate state of Europe’s construction industry

Activity in Europe’s construction industry has slumped as sites are closed, supply chains break and clients suspend investment plans, according to a number of reports from economic monitoring organisations around the continent.

The collapse of confidence was revealed by economic consultant IHS Markit this week. Its Eurozone PMI, based on a survey of purchasing managers, fell from 52.5 in February to 33.5 in March. A figure of 50 shows no change in expectations. This is the largest monthly fall since the 2008 financial crash.

In Italy, until recently the European country hardest hit by the pandemic, the PMI index was put at 15.9 in March, the lowest level since the survey began in 1999.

Gabriele Buia, president of Italy’s national association of construction companies, called last week for Rome to make loans available to companies as a form of commercial intensive care.

Other countries in the region are experiencing similar plunges in work. Domenico Campogrande, director-general of the European Construction Industry Federation, commented in the Financial Times: "Activity is down by about 60 to 70% in southern Europe – it is an unprecedented shutdown."

The effect on suppliers was suggested by Swiss plumbing supplier Geberit, which said this week that the closure of sites in Italy, UK, France, Spain and Austria had contributed to orders falling by a low-double-digit percentage rate during March.

Christian Buhl, chief executive of Geberit, told investors in a conference call: "The coronavirus pandemic has led to an unprecedented global economic crisis and changed business realities over the last three weeks at a speed never seen before."

The extent of the potential investment collapse was indicated by a forecast published by German economic research institutes, which suggested that the country’s economy would contract by almost 10% in the three months to June.

The Munich-based Ifo Institute published a study last month predicting that, in the worst case, a three-month lock-down would lead to a 21% contraction in the German economy, meaning a loss of output of about €730bn.

A two-month suspension would reduce it by up to 14%, or almost €500bn.

Meanwhile, the Paris-based Organisation for Economic Cooperation and Development (OECD) reported that its index of composite leading indicators recorded its biggest-ever drop in March, with all major economies suffering a "sharp slowdown", apart from India, which registered a "slowdown".

Last month, the OECD estimated that economies lose two percentage points of economic growth for each month they are locked-down. It added that there was no way of estimating how long lock-downs were likely to last.

Image: The Genoa bridge scheme. Lights were turned on Friday evening, 21 March, as the national anthem played throughout the city (Salini Impregilo)

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