Germany February construction PMI 41.2 vs 42.5 prior

German construction activity eased back in February, with incoming new work continuing to stay rather subdued overall. It suggests that any major recovery in the sector is still a non-starter but we'll see how the sentiment will change amid the latest political developments. For now, all three sub-sectors i.e. housing, commercial, and civil engineering are still in contraction territory. HCOB notes that:

“The construction sector is still far from recovery. After a strong month-on-month increase in the headline PMI in January, companies couldn't keep up the momentum and reported a faster fall in activity. This drop in performance can be seen in the residential construction sector, commercial real estate, and civil engineering. The recession hits hardest in residential construction and is the least severe in civil engineering. If the newly formed government decides to roll out a comprehensive infrastructure program, it would likely benefit civil engineering the most. However, the economic boost would also help other sectors of the construction industry.

“New orders are still scarce in the construction sector. Since spring 2022, orders have been dropping month after month. Currently, there are no signs that the construction industry will get more orders anytime soon. Against this backdrop, companies continue to cut jobs, with the pace of staff shedding remaining broadly steady for five months.

“Looking ahead, companies are slowly crawling out of the depths of depression. The index of future activity has actually risen to its highest level since February 2022. Although companies, on balance, still think that activity in a year's time will be lower than it is today, the trend of rising confidence over the past three months shouldn't be overlooked.

“A glance at the low capacity utilization in the construction sector, evidenced by the increasing availability of subcontractors over the past two years, shows that an economic stimulus package would be particularly effective right now. With low capacity utilization, new orders could be absorbed without significant price increases. In this sense, it's a good time to kickstart the economy with a government infrastructure program.”