According to the report from HCOB, activity in the construction sector continued to contract in May, while the pace of contract slowed compared to the previous months.
The eurozone construction PMI rose to 42.9 points from 41.9 points in April. The index remains below 50 points, which indicates a reduction in activity in the sector, for the 25th month in a row. Negative output trends reflected further declines across the three largest eurozone economies - Italy, Germany and France. In all three cases, rates of contraction nonetheless softened from the previous survey period, with only a marginal drop in output seen in Italy.
The HCOB said that all three broad areas of the construction sector recorded a lower output, with the housing sector being the worst performing sub-sector for the 21st consecutive month. Falls in commercial and civil engineering activity were also relatively strong. However, all three sectors experienced a softer drop in output than in April, marking the first time since the start of 2023 where all monitored countries and industries have moved in a positive direction. New orders in the construction sector fell again in May (for the 26th month in a row), while the rate of decline accelerated compared to April. The labor force also declined last month, with the rate of job losses accelerated to a solid pace that was the fastest recorded in exactly four years. Eurozone construction firms also sharply reduced purchasing activity, with the pace of contraction accelerating to a 7-month high. However, average delivery times shortened to the greatest extent in just over 15 years, driven primarily by improving supply chains in Germany. As for the inflationary situation, despite ticking up slightly from April, the overall rise in input prices was only modest. The data also showed that construction companies in the euro area remained pessimistic regarding the year-ahead outlook for activity. However, amid relatively promising signals in terms of supply and prices, pessimism reached its lowest level since March 2022.