Eurozone construction activity contracts at steepest rate since May 2020

According to the report from IHS Markit, the Eurozone Construction Total Activity Index fell from 45.5 in December to 44.1 in January, to signal a sharp and accelerated decline in eurozone construction activity. Notably, the rate of contraction was the quickest recorded since last May, and stretched the current sequence of reduction to 11 months. Companies frequently linked the latest drop in activity to the coronavirus disease 2019 (COVID-19) pandemic and weaker sales. Underlying data signalled reduced construction output across each of the three monitored sub-sectors, with civil engineering seeing the sharpest fall.

January survey data revealed a further decline in home building activity across the eurozone, thereby stretching the current period of reduction to 11 months. Commercial building activity fell for the eleventh successive month in January, and at the sharpest rate since last May. Work undertaken on civil engineering projects decreased again in January. The fall stretched the current period of decline to 18 months. Notably, the pace of contraction was the quickest since last May. 

New business placed with eurozone construction companies decreased for the eleventh month in a row at the start of 2021. Moreover, the rate of decline quickened from December and was solid. According to anecdotal evidence, restrictions to curb the spread of COVID-19 and relatively weak market conditions had restricted sales and led to delays in the sign-off of projects. 

The sustained drops in activity and new work drove a further decline in employment at eurozone construction companies during January. Job cuts have now been recorded in each of the past 11 months. Though modest, the rate of job shedding was the fastest for three months. 

Although activity and sales trends remained weak, eurozone construction firms expressed optimism towards the 12-month outlook amid positive vaccine news. This was the first time that firms had forecast growth of activity since July 2020.