Eurozone construction sector sees decline in production – PMI

The eurozone construction sector posted another sharp decline in output in June, according to a closely watched survey released on Thursday.

Latest HCOB The eurozone PMI index of overall construction activity fell to 41.8 from 42.9 in May. A reading above the neutral 50.0 level indicates growth, while below suggests recession.

The pace of decline in production was the second-strongest since mid-2020. Companies reported weak demand and a drop in order volume, leading to further job cuts.

Production declined across all subsectors, but residential construction remained the weakest.

Among the leading member states, Germany (the bloc’s largest economy), France and Italy also saw output fall sharply.

Tariq Kamal Chaudhry, economist at Hamburg Commercial Banksaid the sector was “stuck in recession with no clear path to recovery.”

He added: “The failures of the three largest economies in the zone have been particularly severe this month.

“The eurozone construction sector needs a growth story, but the outlook for the future does not give much reason for optimism. Falling inflationary pressures alone will not be enough. Monetary measures in the form of significant interest rate cuts are necessary for this interest-sensitive sector. However, caution currently prevails at the European Central Bank.”

In June, the ECB cut interest rates for the first time since 2019 by 25 basis points to 3.75%. However, the bank adopted a cautious tone and warned that further cuts were unlikely in the near future.