Germany February construction PMI 39.1 vs 36.3 prior | Forexlive

• Prior 36.3

Total activity in Germany’s construction sector fell at its slowest rate in five months. But make no mistake, this is still a poor showing in the grand scheme of things. Once again, all three sub-sectors showed a decline in activity with civil engineering the worst performing. Besides that, input prices rose for a third month running to its highest in 11 months. HCOB notes that:

“These numbers continue to paint an ugly picture. True, the PMI has gone up by almost 3 points which is not negligible.
However, the index remains still deep in recessionary territory and it is only a one-month movement for now.

“Housing remains the main driver of the recession in construction, followed by commercial real estate activity. A silver lining
comes from civil engineering as activity has remained more or less the same as in January, instead of continuing its hefty fall
of the previous five months.

“Growth territory remains far away. This is best indicated by new orders which have been shrinking at a fast pace for two
years running. The fall softened a bit over the last three months. But this means only that the deepening of the crisis has lost
some momentum, while the crisis is far from over.

“One thing that does complicate the longed-for recovery is the fact that input prices are on the increase again for three
months straight. Subcontractor rates rose in February for the first time in five months. This means that construction
companies are not only suffering from the high interest rate level but also from increasing costs. Given the weak economy, it
is difficult to build residential units that are both attractive for the builder and affordable to the people.

“The assessment about future activity has been negative almost continuously since the start of Covid-19 in 2020. It is as if
pessimism has almost entered into the DNA of the construction sector. However, we know that better times will eventually
come back. Just as an example, during 2016 to 2019, construction businesses were much more positive on the future. What
could possibly trigger a change for the better? Lower interest rates are certainly one ingredient as well as a general
economic recovery. Interest rate cuts, though probably not too many, are around the corner and we are convinced that the
recession will be over soon.”