Inflation and war concerns see Eurozone orders slide

That’s according to the latest S&P Global Eurozone Construction Purchasing Managers’ Index (PMI), which posted 43.0 in August (where any score below 50.0 indicates a contraction). That was down from 44.3 in July.

Total activity has now decreased for 52 months.

The steeper fall in construction activity reflected an accelerated decline in France, that was the most pronounced since May 2020.

Italian companies also saw the fastest contraction for four years but German companies registered their softest fall in 2026 to date.

Residential construction was the sector to see the sharpest decrease, followed by commercial construction. Civil engineering activity was the softest decrease of the three.

Meanwhile, new orders dropped at the fastest rate since April. There was a particularly marked drop in France, and a renewed decline in Italy. Construction orders fell at a softer rate in August than was seen in July.

But cost inflation did ease from April’s peak to reach a six-month low, albeit well above the series average.

Usamah Bhatti, economist at S&P Global Market Intelligence, said, “August data revealed a sharper downturn in construction activity, largely in response to a steeper deterioration in demand conditions. New business intakes fell at the quickest pace in four months, with the decline broad-based across the monitored nations. Moreover, the three sub-sectors of construction also remained firmly in contraction territory, again led by housing.

“Weakness across the sector weighed on the outlook for activity, with firms signalling pessimism regarding the year ahead. According to panel members, headwinds to activity stemmed from inflationary concerns and the war in the Middle East. Companies will take heart from the fact that overall cost inflation trended downwards again to reach a six-month low, however.”

UK experiences ‘sustained downturn’

Meanwhile, a separate survey for the UK revealed a “sustained downturn” in August, again led by weakness in the residential building sector.

The S&P Global UK Construction PMI registered 44.3 in August, down from 44.7 in July. It was the 20th successive month that the index scored below the 50.0 neutral value.

All three sub-sectors recorded a reduction in construction activity in August but housing (37.6) was the only category to register a faster pace of contraction than in July. Commercial activity scored 47.8 while civil engineering (40.5) decreased to the least marked extent since March.

There was a modest decline in new orders, at the slowest rate since September 2025.

Tim Moore, economics director at S&P Global Market Intelligence, said, “Sluggish demand conditions and low client confidence, combined with anxiety about the impact of the Middle East conflict, were again factors contributing to lower workloads across the construction sector. Total new business nonetheless decreased to the least marked extent for 11 months amid reports of support from transport infrastructure work and some pockets of vitality such as data centre roll outs and energy sector projects.

“Encouragingly, input price inflation eased to its lowest since February and supply chain performance was broadly stable.”