Eurozone construction output slumps in April, sentiment collapses
LONDON (ICIS)–Output in the chemicals-intensive construction sector across the eurozone collapsed in April as coronavirus-led lockdowns dampened logistics and sentiment, analysts at IHS Markit said on Thursday.
The Eurozone Construction PMI index for April fell to 15.1 points, down sharply from the March reading of 33.5 points.
A reading below 50.0 points shows economic contraction.
“[The data is] signalling an unprecedented month-to-month decline in construction activity across the eurozone,” said the analysts.
“Survey data showed Italy and France recorded extreme contractions in construction output, while Germany registered a far slower decline but one that was still marked overall.”
The index includes data only for the three largest economies within the 19-country currency union.
Construction activity in Europe’s fourth biggest economy, Spain, is also expected to have slumped as the nation was under lockdown for the whole of April.
The UK’s construction output also collapsed in April to record lows, at 8.2 points.
There were no bright spots in any of the eurozone’s construction sub-sectors, with activity in commercial construction projects, home building, and civil engineering, which includes public works, posting sharp drops.
Despite poor demand, logistics issues put supply chains under pressure in April, with delivery times lengthening at a “severe” rate.
In line with falling inflation across the 19-country currency union, costs for construction companies also fell, mostly on the back of lower energy prices.
The outlook for coming months is bleak, with employment in the labour-intensive sector set to suffer.
“Demand [in April] was also severely affected by the lockdown measures, with new orders falling at the sharpest rate seen in over 20 years of data collection,” said Bernard Aw, principal economist at IHS Markit.
“In response, firms made deep cuts to their workforce numbers and purchasing activity. Business sentiment remained negative in April, with the Covid-19 crisis the predominant concern among eurozone construction firms.”
The Eurozone Construction PMI is compiled from responses by purchasing managers in a panel of around 650 construction firms in the eurozone.
The headline figure is the Total Activity Index, which tracks changes in the total volume of construction activity compared with one month previously.
The construction industry is a key consumer of chemicals, driving demand for resins, plastics, insulation materials, paints and coatings, solvents, adhesives, or synthetic fibres, among others.
Petrochemicals highly-dependent on construction activity are polyvinyl chloride (PVC), polystyrene (PS), expandable polystyrene (EPS), polyethylene (PE), polypropylene (PP), nylon, polycarbonate (PC), or titanium dioxide (TiO2), among others.
In 2019, construction output in the EU stood close to €1.5tr, with nearly 15m workers employed across the 28-country bloc, according to the European Construction Industry Federation (FIEC).
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