Germany's construction sector persisted in experiencing a substantial downturn in December, as political uncertainties negatively impacted order volumes, according to survey results from S&P Global released on Tuesday. The HCOB Construction Purchasing Managers' Index declined to 37.8 in December from 38.0 in November, marking the lowest score since the previous April and indicating a significant contraction in the industry.
The impending federal elections have apparently fostered political uncertainty, compelling many companies to adopt a cautious approach. Some anticipate that a new government might alleviate building regulations, as noted by Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank.
The residential construction segment saw its most significant decline in four months. Civil engineering also experienced a slightly accelerated downturn, while the reduction in commercial construction activity was marginally less pronounced than in November.
Firms continued to report a shortage of new orders, with many potential clients hesitant due to uncertainties about the future outlook and elevated prices.
Looking ahead, 49 percent of firms expressed pessimism about the upcoming year, predicting further contraction. Consequently, construction companies continued to reduce employment in December. The use of subcontractors also saw a sharp decline, following a record-setting decrease in November. Notably, improved availability of subcontractors contributed to continued, albeit slower, reductions in the rates charged by them.
Additionally, construction firms reported stable average costs for building materials and products, following a slight increase in the preceding month.
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