German construction Purchasing Managers’ Index (PMI) remained in contraction with a reading of 47.1 in July, despite an improvement in residential builds, according to the latest PMI data by IHS Markit.
While the marquee indicator for construction activity remains below the 50-point watermark, which signals the difference between contraction and expansion, the reduction has markedly eased from the lows of 41.3 witnessed in June and the severe levels of 31.9 in April.
Activity elsewhere remained subdued, with both the commercial and civil engineering categories seeing sustained contractions, though the respective rates of decline were the weakest in the past five months.
Interestingly, Germany’s latest construction PMI conflicts with the anecdotes received by Davis Index from local steel producers who have championed the fact that the construction sector has been the country’s saving grace with respect to steel consumption.
Davis Index has had numerous interactions with German steel producers that have commented that those who produce construction-grade steel have generally avoided the worst impacts of the COVID-19 pandemic, benefitting from robust domestic steel consumption.
Surprisingly, German construction firms remained negative on the outlook for activity over the next 12 months, citing greater caution among clients and squeezed budgets despite the implementation of sweeping stimulus measures.