German construction market improves

A return to growth in the German construction sector has been indicated, according to results from the latest Purchasing Managers’ Index (PMI).

Its latest seasonally-adjusted figures for February found there was increased activity in both commercial and housing markets.

The index results increased from 49.5 in January, to a three-month high of 53.1 (with scores over 50 representing positive growth). Respondents to the study, which measures company construction output, indicated that favourable weather had been a factor in the improved position.

Increased activity in the housing sector was also cited as another key reason for the positive performance. According to the latest PMI findings, growth in residential building projects was at its strongest for nearly three years.

There was also an increase in commercial construction activity in February, which reversed a decline in the previous two surveys.

However, figures for the civil engineering sector showed a fall for the third successive month, though its rate of decline was less marked than it had previously been.

The pattern of growth was enhanced with results showing that German contractors had increased their employee numbers – with the rate of job creation accelerating to the highest level in nearly a year. Results also indicated that contractors expected construction activity to increase even further over the next 12 months.

Oliver Kolodseike, economist at Markit, explained the construction sector was “likely to show further improvement” in the coming months. He said this was due to factors including construction costs rising at their slowest rate in five years, and companies expanding their employee base.

Kolodseike said, “February’s survey results signalled a rebound in German construction activity, with the PMI rising above the crucial 50.0 mark. The improvement was largely attributed to a strong rise in housing activity, with the respective rate of growth the strongest in nearly three years.

“Another positive development is the improvement in optimism towards the 12-month business outlook. The level of positive sentiment reached a four-year high amid reports of anticipated new order growth.”