Eurozone construction PMI rises to ten-month high, but outlook still gloomy

(Sharecast News) - The contraction of the eurozone's construction sector slowed to its lowest rate in ten months in October, though the downturn remained deeply entrenched, according to statistics from S&P Global and the Hamburg Commercial Bank on Thursday.

The S&P Global-HCOB eurozone construction purchasing mangers' index (PMI) increased to 43.0 last month, up from 42.1 in September and the highest reading since December 2023.

Nevertheless, the PMI remained firmly below the key neutral level of 50 which separates growth from contraction, and has been in negative territory since mid-2022.

Despite the pickup in the headline PMI, new orders contracted faster during the month of October, while employment declined and input buying was reduced again.

Meanwhile, while input cost pressures eased to their lowest levels since July 2023, business confidence declined at its fastest pace so far this year.

"The Eurozone's construction sector remains weak," said Tariq Kamal Chaudhry, economist at HCOB. "The downturn spans all subsectors, with residential real estate in the deepest crisis. From the industry's perspective, a substantial rate cut by the European Central Bank would be welcome in the coming months."

Chaudhry said Germany remains the "problem child" of the region's construction sector. "The HCOB PMI for October was significantly impacted by ongoing weakness in the region's largest economy. German construction companies expect a decline in activity in the coming year, though sentiment has improved slightly since September. The persistent pessimism regarding future prospects reflects rising concerns over the broader economic outlook, adding to the industry's uncertainty."