Eurozone construction downturn continues as housebuilding drops
By Benjamin Chiou
Date: Tuesday 07 Jan 2025
(Sharecast News) - Construction activity across the eurozone remained firmly in contraction in December, according to a new survey on Tuesday, as new orders fell significantly and declines in employment and purchasing accelerated.
The S&P Global and Hamburg Commercial Bank (HCOB) construction purchasing managers' index for the single-currency region rose to 42.9 last month, up just 0.2 points from November.
Nevertheless, December's reading was still way below the neutral level of 50.0, which separates contraction from growth, with activity having now fallen for 32 months straight.
The drop in housing activity across the region accelerated to its steepest rate since September, while declines in commercial and civil engineering activity eased slightly, with both seeing their slowest falls in seven months.
According to HCOB, the reduction in construction activity was due to stronger declines in the eurozone's two largest nations, Germany and France, with the latter posting its steepest contraction since April. Italy, however, managed to pull into growth territory for the first time since March.
New orders were lower for the 33rd consecutive month, albeit at a softer pace than November, though the drop in staffing levels was its most severe since May. In France, in particular, job cuts reached their worst levels since May 2020.
"Housing activity is in deep crisis, shrinking disproportionately compared to commercial and civil engineering activities," said Tariq Kamal Chaudhry, economist at HCOB.
"To revive the residential property sector, significant interest rate cuts by the ECB would likely be necessary soon. However, HCOB Economics forecasts only two rate cuts by spring 2025. Due to increasing price pressures throughout the year, further rate cuts in Frankfurt are unlikely to be announced by year-end."
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