July showed further expansion in the German construction market, driven by sustained growth in residential building activity, according to the latest report by IHS Markit.

However, the report noted that there were declines in civil engineering and commercial building output, while new business fell for a second month running.

IHS Markit also said that companies reported their worst outlook for construction output since last November.

Despite this, total construction output in Germany rose for the 18th consecutive month in July. IHS Markit said the pace of growth was modest, but quicker than one month earlier. This was indicated by the headline seasonally adjusted Purchasing Managers’ Index (PMI) – which is based on a single question asking respondents to report on the actual change in their total construction activity compared to one month ago – posting at 51.6, up from June’s ten-month low of 50.4.

IHS Markit said the growth was supported by higher levels of housing activity during the month. It said that although the rate of expansion in residential building output had accelerated since the previous month, it was moderate overall and well below the rates seen at the beginning of the year.

Commercial building and civil engineering activity fell further during the month, stretching their declines to two and three months.

IHS Markit said that a number of companies reported a lack of demand, and the survey showed a second successive monthly decline in new orders.

Oliver Kolodseike, economist at Markit, said, “It’s a bit of a relief that the Construction PMI ended its recent downward trend in July and rose slightly from the 10-month low recorded in June.

“However, the data signalled only a slight rise in total construction output that was solely driven by higher activity in residential building.”

He added that with new business falling for a second month, and business optimism at an eight-month low, there was still a danger that the headline number might fall in the coming months.

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