France saw its most dramatic fall in construction activity since January, while German firms continue to struggle.
ADVERTISEMENTThe construction industry in the eurozone is suffering from weak demand that has led to a raft of job losses and cost-cutting measures.
That's according to a report released by S&P Global and Hamburg Commercial Bank on Tuesday.
The Construction PMI Total Activity Index, a seasonally-adjusted indicator that tracks monthly changes in the construction sector, came in at 41.4 this July.
In June, this total was recorded at 41.8.
Tuesday's report shows that construction output in July quickened at the fastest rate seen in six months, driven by contractions in the housing market.
This sector recorded its most marked reduction since April 2020, which then led to a steeper month-on-month fall in employment.
"In July, housing activity dropped for yet another month due to weak demand conditions, also leading to another round of job shedding as the employment situation worsened in July," said Norman Liebke, Economist at Hamburg Commercial Bank.
"Commercial activity also worsened but the downturn in the civil engineering sector softened compared to June, mainly due to France."
Depressed conditions across the eurozone
Pessimism is spread across Germany, France, and Italy, according to the new report.
Due to government subsidies, Italy's construction sector had previously seen glints of optimism, although the end of the Superbonus scheme has reversed the trend.
The Superbonus was a tax incentive scheme, criticised for being highly inefficient, that sought to encourage Italians to sustainably renovate their homes.
Tuesday's report showed that July marked the fourth consecutive month of declining demand for Italy's construction sector.
The rate of decline accelerated for the second consecutive month.
In France, meanwhile, total construction activity fell to its lowest level since January, and the rate of job shedding was recorded at its fastest pace since March.
In Germany, activity continued to drop, but the rate of decline eased for the third consecutive month.
ADVERTISEMENT"Overall, the construction sector is still having a rough time [in Germany]," said Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.
Even so, he suggested that the renovation of 40 railroad lines would provide a boost to civil engineering construction in Germany.
The project began in mid-July and is scheduled to be completed by 2030.
Rate cuts unlikely to provide much relief
Looking ahead, experts noted that a predicted September rate cut from the ECB is unlikely to provide significant stimulus to the depressed sector.
ADVERTISEMENTInterest rate cuts can often boost activity as it becomes less expensive to borrow money and therefore launch construction projects.
"While looser monetary policy should provide some support to the construction sector in time, we suspect that any boost will be limited because the ECB will cut interest rates gradually and keep them high by historical standards," said Jack Allen-Reynolds, deputy chief eurozone economist at Capital Economics.
He added: "It is difficult to see a significant turnaround in the sector when the PMIs show that firms are experiencing steep declines in new orders. Reflecting that weakness in demand, the future activity PMI dropped sharply, to a seven-month low."
On the prospect of a September rate cut, the General Secretary of the European Trade Union Confederation, Esther Lynch, told Euronews Business that the ECB has a "responsibility to avoid a recession [...] by announcing a significant cut".
ADVERTISEMENT"These [PMI] figures show clearly how high interest rates are strangling investment, putting people out of work, and taking us dangerously close to a completely avoidable recession."
"Europe cannot afford a slump in construction at a time when many countries have a severe shortage of both homes and good quality, skilled jobs."
