According to the report from S&P Global, the index of activity in the construction sector of the eurozone declined in July, recording the third monthly decline in a row, and reaching the lowest level since February 2021.
The Eurozone construction total activity index fell to 45.7 points in July from 47.0 points in June. Economists had expected an increase to 48 points. The index value below 50 points indicates a reduction in activity in the construction sector.
The data showed that the component of activity in the commercial construction sector recorded the 4th consecutive monthly decline and reached the lowest level since February 2021. The component of activity in the housing construction sector decreased again in July (for the 3rd month in a row), but remained almost unchanged compared to June. Meanwhile, the component of activity in the civil engineering sector declined at a softer, albeit still sharp rate during July.
The number of new orders in the construction sector fell for the fourth month in a row, while the pace of decline was the most significant since May 2020, due to significant economic uncertainty and a sharp increase in costs. The rate of input cost inflation cooled at the start of the third quarter, but remained substantial overall. Average vendor performance across the eurozone construction sector worsened in July. Though rapid, the rate at which lead times lengthened was the least marked since February 2021. Meanwhile, employment in the construction sector continued to reduce in July, but the pace of decline was negligible.
As for the prospects for the year ahead, the degree of negative sentiment among construction companies was the highest since the first wave of the pandemic in April 2020. Companies that expect a decline in business activity over the next 12 months pointed to strong inflationary pressures, tightening financial conditions and difficult economic prospects.