- Construction PMI 41.7 vs 38.9 prior.
Key findings:
- Further sharp, albeit slower, fall in total industry activity.
- Rate of job shedding quickens.
- Input costs continue to fall.
Comment:
Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:
“The construction sector is starting to show some faint signs of life again, but we should not get carried away. The headline index rose in September to its highest level since May of last year. That said, the sector is still shrinking - just not as quickly as it has been over the previous 15 months.
The uptick is largely due to impulses from residential and commercial construction, while civil engineering has taken a bigger hit compared to the previous month. Overall, things still look pretty bleak in the construction sector. Construction companies are still grappling with the fact that month after month, they are receiving fewer orders. This drought has been dragging on for over two and a half years now.
The only silver lining is that the drop in orders has not been quite as steep as it was last year. Still, the data clearly shows that the recession in the construction industry will likely continue for quite a while, and most companies seem to share this outlook. In fact, the index for future activity fell to a nine- month low in September. A lot of companies say it is because of the weak order situation, the overall economy, and political uncertainty.
For subcontractors, the tough times are far from over. They are getting hit on two fronts: demand for their services is shrinking and - unsurprisingly – they are having to offer discounts. On the flip side, this has contributed to a drop in construction costs. In fact, purchase prices have been falling for six months now. If this trend continues, many building projects that have been cancelled or delayed due to high costs could still get the green light. This would also be helped by the European Central Bank’s apparent shift to a path of lowering interest rates.”
