- Prior 41.4
The slump in Germany's construction sector continues in July, , led by a deepening decline in work on residential building projects. Weaker demand conditions are weighing as there is another sharp fall in new orders, leading to constructors to scale back both purchasing activity and employment as they expressed growing concern towards future output. HCOB notes that:
“The German construction sector is in a tough spot right now. Activity in the construction sector in Germany fell again at an accelerated pace in July. Our nowcast model, which also takes into account the HCOB PMI values, now indicates a sharper slump for the third quarter construction output of around 0.8%.
“Specifically, the housing and commercial sectors took a steeper hit in July, while civil engineering also experienced a decline, but it went against the prevailing trend. Based on our nowcast, it appears that the construction sector likely contracted during the second quarter and, according to the new orders and suppliers’ delivery times PMI, this downward trend might persist into the third quarter.
“Weaker demand in the construction sector is leading to falling input prices. These have declined for the third month in a row and are now approaching the pace of the 2009 housing crisis. Even though the PMI is below 50 and therefore signalling falling prices, it is important to note that prices remain at historically high levels in absolute terms.
“A mixture of higher interest rates, a stagnating economy and continued high construction costs make construction companies deeply pessimistic for the coming months. That is shown by the renewed low index value for future activity in July, which provides another signal that business conditions for construction firms are likely to get worse before they get better."
