Germany's construction sector carried strong momentum into the new year, seeing growth of total industry activity accelerate for the fourth month in a row to the fastest since March last year.
January's PMI data from IHS Markit showed that the increase in activity coincided with rising inflows of new work, a pickup in job creation and greater confidence towards the outlook for activity over the next 12 months.
There was also a strengthening of cost pressures, as higher demand for raw materials and other construction inputs placed greater strain on supply chains.
The headline seasonally adjusted IHS Markit Germany Construction Purchasing Managers’ Index (PMI) registered 54.9 in January, up from December's 53.8.
The pace of growth signalled by the index was the second fastest over the past two years.
As had been the case throughout most of 2019, the increase in total industry activity in January was led by homebuilding, which recorded a sharp rate of expansion that was the fastest for ten months.
Commercial activity also contributed to overall growth, with the level of work on office spaces, manufacturing plants, retail centres and other commercial projects rising for the first time in seven months, albeit only modestly.
Civil engineering activity meanwhile fell for the tenth month in a row in January, though the decline was only modest and the second weakest in the current sequence.
Anecdotal evidence indicated that milder than usual weather had been a contributing factor in the upturn in total industry activity in January.
At the same time, constructors noted an increase in underlying order book volumes, which were up for the third month running and showed a marked acceleration in the rate of growth to the fastest since February last year.
German building companies reacted to increased workloads by taking on additional staff and expanding their use of subcontractors.
Moreover, both the rate of job creation and the rise in sub contractor usage were the strongest in ten months in January.
Higher activity and a growing pipeline of work also led to an increase in the volume of raw materials and other building products purchased by constructors.
In line with trends elsewhere, the rate of growth accelerated to the fastest since March last year.
Supply chain pressures increased as a result, with lead times on inputs lengthening to the greatest extent since last May and the rate of cost inflation ticking up sharply to a six month high.
Looking ahead, constructors reported modest optimism towards the outlook for activity over the next 12 months, citing the recent strong inflow of new orders and growing backlogs of work.
Though an improvement on the pessimism observed over the second half of 2019, the degree of confidence remained relatively subdued compared to the highs over the past four years. ■