Germany December construction PMI 37.8 vs 38.0 prior

Germany’s construction sector closed out the year firmly in contraction territory. The headline reading is an eight-month low as home building activity continues to be the main drag. The outlook for this year is not great as firms are continuing to expect overall activity to stay in decline in 2025. HCOB notes that:

“For the construction sector, 2024 wraps up just as poorly as it kicked off. December’s PMI lands at 37.8, barely above
where it stood at the start of the year. Over the last three months, construction activity has actually taken a sharper dive.
Political uncertainty seems to have played a big role here, with the looming federal elections prompting many companies to
adopt a wait-and-see attitude, perhaps hoping a new government might ease building regulations.

“The residential construction sector remains the hardest hit, with the downturn only getting worse in recent months.
Commercial real estate is also in the red, though the situation is not quite as dire as in residential construction. Civil
engineering is following a similar trend. Official building application numbers suggest 2025 won’t be any easier, and new
orders in December took another steep tumble, reinforcing the short-term challenges.

“These are still difficult times for subcontractors. While the demand for their services is not falling quite as fast as before, the
decline is still dramatic. On top of that, the quality of subcontractor services is reportedly slipping, according to the PMI
survey. This tough environment is putting pressure on prices too, with rates subcontractors can charge dropping for the fifth
month in a row.

“Job cuts, which have been ongoing since April 2022, continued through December. Interestingly, construction activity has
been shrinking faster than employment, suggesting a hit to labour productivity and rising labour costs. This makes it more
probable that further layoffs will lay ahead in the months to come.”

This article was written by Justin Low at www.forexlive.com.