A decline in commercial and civil engineering activities, as well as a decline in new business, also contributed to this figure.
advertisementThe HCOB Eurozone Construction Purchasing Managers Index (PMI) for March, released Friday morning, was 42.4, according to S&P Global. This was down from 42.9 in February, and was mainly due to a sharp drop in housing activity.
More jobs have been cut and some budgets have been tightened, mainly due to a significant drop in new business due to a decline in demand. This is reflected in fewer subcontractors used and fewer raw materials and inputs purchased.
Civil and commercial engineering companies continue to reduce activity, with commercial output in March at its lowest level since November 2023.
On the plus side, cost pressures are increasing at the slowest rate in five months.
Meanwhile, the UK construction sector showed slight growth in March 2024. The UK construction industry PMI was also released on Friday and came in at 50.2, according to S&P Global. This is up from 49.7 in February and the highest level since August 2023.
This number was primarily driven by new business inquiries and a rebound in the sales pipeline as consumers became more positive about the economic outlook and their own financial situation in the coming months. Furthermore, new orders also surged at the fastest pace since May 2023.
Why is the eurozone construction sector struggling?
Recent months have been particularly difficult for the euro area's construction sector, with construction costs remaining uncomfortably high and fewer building permits issued overall. Along with this, the prices of existing homes are also rising little by little, which may support the sales amount of newly built homes.
Not only home buyers but also construction companies are becoming more cautious due to the effects of the slump in the global and euro area economies and continued high interest rates.
This is especially true for construction companies in major markets such as Germany, which have put many projects on hold and canceled some others. Construction companies often rely on large amounts of debt for projects, so rising interest rates can significantly increase borrowing costs.
However, retrofit figures in the EU have remained relatively stable over the past few months, with digital infrastructure investment and sustainability works also progressing well.
Regarding the EU construction outlook for 2024, ING Group said, “Production is expected to decline slightly (-0.5%).'' Long lead times will further reduce the volume of new residential and non-residential construction, as homebuyers and businesses have been reluctant to invest in new properties.
“However, there is a structural increase in demand in the refurbishment subsector (including sustainability works). Investment in infrastructure is also expected to continue to increase. The main drivers of this continued growth will come from the EU Recovery Fund, investments in digital infrastructure, grid expansion and the energy transition.”
