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German construction activity returns to growth in August

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German construction activity returns to growth in August

Construction activity in Germany increased slightly in August after grinding to a halt in July as activity rebounded in the civil engineering sector after contracting in the previous month.

The IHS Markit Germany construction purchasing managers' index rose to 51.5 in August from the 50.0 "no-change" mark in July, but was below the year-to-date average of 52.4.

New orders decreased for the first time in four months, partly due to a lack of available resources. Constructors increased their pace of hiring due to capacity pressures, with the rate of job creation picking up from July's 1.5-year low.

"Capacity constraints were a theme throughout the data: From a lack of availability of sub-contractors, to bottlenecks in supply chains," said Phil Smith, principal economist at IHS Markit. "These constraints not only held back the top-line growth number, but also affected constructors in the form of longer lead times on building materials and higher costs."

Average prices paid for building materials and products increased to their highest level in 10 months. Constructors' degree of optimism about activity over the next 12 months fell to its lowest level since November 2016, IHS Markit said.