The rate of job losses was at a 27-month record and purchasing activity fell sharply amid a further drop in new work.
The downturn in German construction activity deepened at the end of the first quarter of this year, driven largely by a sharp and accelerated decrease in the building of homes. Faster rates of decline in employment and purchasing activity were also recorded, with firms facing another steep drop in intakes of new orders. A more welcome development was a reduction in cost inflation to the slowest rate in six months, albeit one that was still solid overall.
March saw the Markit Germany Construction Purchasing Managers’ Index (PMI) – a single-figure snapshot of overall activity in the construction economy – drop to a 13-month low of 41.9, from 43.8 in February.
Total industry activity has now decreased for 12 successive months, with the latest fall partly attributed to unusually bad weather conditions in Germany.
Of the categories of construction monitored by the survey, residential activity decreased the most markedly over the month. This was the only sector that saw a faster rate of contraction than one month earlier, with March’s decline the steepest since February 2012. There were further marked decreases in both commercial building activity and civil engineering work, although rates of contraction moderated in both cases.
With workloads down sharply, German constructors recorded further job shedding in March. The latest decrease in employment was the sharpest since December 2010, and extended the ongoing sequence of decline in staffing numbers to four months. A similarly marked fall was registered for purchasing activity, which decreased at the fastest rate in over a year in March. Lead times faced by constructors nevertheless lengthened on average over the month, although the deterioration in supplier performance was the least marked so far this year.
March data signalled a further decrease in the volume of new work placed with constructors operating in Germany, with panel members mentioning some hesitancy in decision-making among clients. That said, surveyed businesses were generally confident of seeing a rise in the level of activity at their units in the forthcoming year. In fact, the overall degree of optimism was the highest in ten months, and strong in the context of historic data.
Purchase prices continued to rise during March, continuing the upward trend observed since August 2009. Anecdotal evidence partly linked the latest increase in cost burdens to higher prices for energy and raw materials on international markets. Although the rate of inflation was solid, it was the slowest in six months and below the long-run series average. Meanwhile, the percentage of work contracted out by constructors decreased markedly in March, though sub-contractor availability remained broadly unchanged. Rates charges by sub-contractors meanwhile rose modestly over the month.
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