German Construction Activity Remains In Deep Contraction

(RTTNews) - Germany's construction sector continued to contract and the pace of decline worsened in February, survey results from S&P Global showed on Thursday.

The HCOB construction Purchasing Managers' Index registered 41.2 in February, down from January's 20-month high of 42.5. The reading remained well below 50.0 indicating contraction.

The decline in activity was broad-based by sub-sectors, with rates of decline accelerating in all three cases. While housing activity remained the worst-performing segment, civil engineering was the most resilient. At the same time, the decline in commercial activity was in the middle of the other two.

The reason for the sustained downturn in activity was a lack of incoming new orders. Firms cited higher interest rates and hesitancy among customers as factors damping demand.

Contractors scaled back staffing capacity, in tandem with decreasing workloads. The pace of job shedding accelerated for the second month.

Average prices paid for raw materials ticked down in February, marking the ninth decrease in the past 11 months. The rate at which purchase prices decreased was moderate. The decline in input costs stemmed from reduced demand for building materials.

The outlook for construction activity remained bleak as firms highlighted concerns towards future housing activity.

"If the newly formed government decides to roll out a comprehensive infrastructure program, it would likely benefit civil engineering the most," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

However, the economic boost would also help other sectors of the construction industry," de la Rubia said.