CONSTRUCTION IN THE EUROZONE IS DECLINING

07. Jan 2023
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The eurozone's construction sector suffered its biggest drop since the pandemic brought the economy to a standstill in 2020. The data show that rising borrowing costs, a sharp increase in raw material prices, and concerns that a recession could accelerate the fall in property prices weighed on Europe's construction industry.

According to the Financial Times, the December S&P Global Purchasing Managers' Index (PMI) in Eurozone construction showed a total activity index of 42.6, which is a drop compared to 43.6 in November, reports biznis.rs. PMI values below 50 indicate a decline in activity, and in the Eurozone, this is happening for the eighth month in a row.

Activity fell in all three of the eurozone's biggest economies: Germany, France, and Italy. The last three months of 2022 were the index's worst quarter since April 2020, when construction activity was disrupted by the pandemic. The biggest decline in activity was recorded in France, followed by Germany and, to a lesser extent, Italy, according to Trading Economics.

A recent study by Munich's Ifo Institute found that 16.7 percent of German construction companies suffered construction project cancellations in November, up from the usual rate of one to two percent. New orders for house construction in Germany fell by 14 percent in October compared to the previous year.

Construction generates about nine percent of output in the eurozone, so the decline in activity and reduced orders are a bad sign for the overall economy of the European monetary union, which is expected to fall into a mild recession this winter. Analysts state that the construction sector is among the most sensitive to changes in interest rates.

Source: biznis.rs

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