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Financial News: Germany Construction Activity At 8-month Low

Germany Construction Activity At 8-month Low

05/05/2022 - 10:06:00 (RTTNews)

(RTTNews) - Germany's construction sector activity contracted at the start of the second quarter to its lowest level in eight months amid falling demand and intense supply side pressures, survey results from S&P Global showed on Thursday.

The construction Purchasing Managers' Index came in at 46.0 in April, down from 50.9 in March. Any reading below indicates contraction in the sector. Activity declined for the first time in four months.

Data showed that all three broad construction categories registered declines in April, with the steepest contraction seen in commercial activity. Residential construction projects fell for the second straight month.

Civil engineering and commercial construction dropped for the first time this year.

New orders decreased at the fastest rate since April 2020 due to lower demand linked to elevated prices and cautious customers.

The survey showed that delays on construction projects were partly driven by materials shortages especially steel and insulation in the backdrop of the war in Ukraine.

Input price inflation remained sharp in April, driven by greater energy and transportation costs. Construction firms also lowered their employment levels, which fell to the greatest extent for nearly two years.

However, constructors signaled positive outlook for the coming year, but sentiment was the lowest since the initial pandemic shutdowns in the spring of 2020.

"Rising costs are posing a serious challenge to constructors, who are torn between trying to protect margins by passing on some of the burden and not pricing out their clients," S&P Global Economics Associate Director Phil Smith said.

A recent survey by the ifo institute showed that Germany's construction sector morale eroded sharply in April and the share of building construction companies reporting material shortages rose to 54.2 percent in April from 37.2 percent in the previous month.

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