S&P PMI: Germany’s construction sector extends decline in August ’24

Germany’s construction sector continued its steep decline in August 2024, with the HCOB Germany Construction PMI Total Activity Index falling to 38.9, down from 40.0 in July. This marks the lowest reading since May and reflects a sharp reduction in construction output.

The downturn was primarily driven by significant weaknesses in the housing sector, which saw its most marked decline since April.

Commercial building projects also experienced a faster rate of decline, while the civil engineering sector showed some resilience, recording its smallest decline since February.

New orders fell for the 30th consecutive month, though the rate of decline eased slightly. Despite this, the construction sector remained plagued by weak demand, high interest rates, and declining order books.

Employment in the sector decreased at its fastest rate since May, with a record drop in subcontractor usage. However, input prices continued to decline for the fifth straight month, and subcontractor rates fell for the first time in five months.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, noted that the sector’s performance remains dismal, with only civil engineering showing any signs of stability.

He highlighted that while input costs are falling, the overall outlook for the construction sector remains bleak, with recovery appearing distant.