Eurozone construction activity falls for first time in nine months

Eurozone construction activity fell in May for the first time in nine months, moving into contractionary territory amid supply chain issues and rising prices, according to a survey released on Tuesday.

The S&P Global construction purchasing managers’ index for the bloc declined to 49.2 from 50.4 in April, making the sharpest contraction recorded for 15 months. This was attributed to higher raw material prices and supply chain disruptions dampening output and demand.

A reading above 50.0 signals expansion, while a reading below indicates contraction.

The survey found that all three sub-sectors posted declines in May, with house building work falling for the first time since February 2021. Meanwhile, commercial work fell at the sharpest pace since April last year, and the downturn in civil engineering work was the worst for six months.

Usamah Bhatti, economist at S&P Global Market Intelligence, said: "The eurozone construction sector contracted at a mild rate during May, marking the first reduction in activity since last August. The rate of contraction was the strongest since February 2021, and was largely linked to stalled demand and activity amid raw material shortages and higher prices. This was despite tentative indications that delivery delays and rising cost burdens had reached their peaks and began to ease.

"Nonetheless, this is from series record, therefore the impact of supply chain disruptions are likely to remain a hinderance to demand, especially as the war in Ukraine continues. Construction firms in the bloc were increasingly pessimistic regarding the outlook for activity over the coming year, with confidence at its lowest level since October 2020. At the national level, German firms reported the strongest decline in output for nine months, while Italian constructors signalled a further expansion in May that was nonetheless the softest in the current 16-month growth sequence. Businesses in France saw a mild increase that was the fastest since January."