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May 20, 2020

Eurozone construction activity falls to all-time low

Eurozone construction activity falls to all-time low

The IHS Markit Eurozone Construction Purchasing Managers’ Index (PMI) fell to 15.1 in April, a new record low which followed a substantial drop in March, when the figure had fallen to 33.5.

Survey data showed Italy and France recorded extreme contractions in construction output, while Germany registered a far slower decline but one that was still marked overall.

Bernard Aw, principal economist at IHS Markit, said: "Stricter measures to halt the spread of the Covid-19 pandemic placed restrictions on business operations, dealing a substantial blow to eurozone construction firms in April. Construction output across the euro area slumped in April, following a severe drop in March, with Italy and France especially hard hit amid reports of widespread work suspensions among construction firms.

According to Bernard Aw, "demand was also severely affected by the lockdown measures, with new orders falling at the sharpest rate seen in over 20 years of data collection. In response, firms made deep cuts to their workforce numbers and purchasing activity.”

Supply chains remained under pressure despite the substantially reduced purchasing demand. Delivery times lengthened to the greatest extent in the series history and at a rate that was severe overall.

Firms highlighted transport issues, customs restrictions and supply shortages at distributors as key factors for delivery delays. Each of the bloc's three biggest economies reported much slower deliveries, with France recording the most severe delays.

Eurozone building companies remained pessimistic about future activity, with the Future Activity Index coming in well below the neutral 50 level. Of the currency area's three largest economies, Germany had the most negative outlook over the next 12 months, followed by France.

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