More trouble for Germany’s housing sector, as UK stabilises

The latest construction Purchasing Managers Index (PMI) from S&P Global showed a “marked” contractor in the Eurozone construction sector as a whole.

Both activity levels and new orders fell sharply with a “notably steep” decline in housebuilding.

Cost pressures also increased for the first time since April, despite weak demand conditions.

The S&P Global Eurozone Construction PMI Total Activity Index posted 43.4 in September (where any score below 50.0 indicates a contraction), up slightly from 43.0 in August.

France registered the strongest rate of contraction at 39.8, with Germany declining steeply to 43.5. Italy recorded the slowest fall in construction activity at 46.7.

Across the Eurozone, residential construction recorded the steepest drop and the fastest since February 2025, with a rapid fall in Germany.

Commercial construction and civil engineering activity decreased at the slowest rate in seven months and two months respectively.

New orders also fell in September, extending the downturn in demand to four and a half years.

Construction companies in the Eurozone were the most pessimistic in September since April last year, with buyers blaming a lack of demand, rising costs, and squeezed customer budgets.

Trevor Balchin, economics director at S&P Global Market Intelligence said, “The combination of weak demand and renewed inflationary pressure inevitably resulted in the year ahead outlook for activity remaining subdued.”

UK activity stabilises but new orders fall

Meanwhile, the S&P Global UK Construction Purchasing Managers Index increased from 44.3 in August to 46.1 in September.

That was the least marked downturn in activity for eight months, according to S&P Global.

Housing was the worst-performing area of the UK construction industry, at 40.7. Commercial construction was the most resilient, at 48.5.

But there was a “solid decline” in new work in September, with the rate of contraction at its fastest since June.

And average cost burdens also increased sharply in September, despite the rate of inflation moderating to a seven-month low.

UK construction buyers remained optimistic about the prospects of growth over the next 12 months, with 31% of respondents expecting a rise in business activity, whereas 21% predict a decline.

Tim Moore, economics director at S&P Global Market Intelligence, said, “Softer order books, elevated inflationary pressures and concerns about rising borrowing costs were all reasons for construction companies to moderate their year ahead growth expectations during September. This led to a sharp drop in business optimism to its lowest since May.”