German Construction Sector Contracts In May

Germany's construction sector contracted in May as the coronavirus, or Covid-19, crisis weighed on new orders and activity, survey results from IHS Markit showed Thursday.

The construction Purchasing Managers' Index rose to 40.1 in May from 31.9 in April. A score below 50 indicates contraction.

Output remained deep in contraction territory in May amid reports of restrictions on workplace activity and a slump in new work.

All main areas of construction reported sustained declines in activity in May. The steepest reduction was in civil engineering, followed closely by commercial activity.

Residential activity showed the greatest resilience to the downturn, though it still remained in one of its deepest slumps over the past ten years.

Due to the wait-and-see attitude among clients, new orders dropped for the third straight month in May. Expectations towards activity over the next 12 months remained in negative territory, although the degree of pessimism eased further.

Job cuts were reported for the third straight month in May but employment decreased more slowly than in April.

Weak demand for materials and other building products in turn weighed on input price inflation, which eased for the third straight month to the weakest since February 2015.

"Given how the picture has changed since the start of the year and how firms have had to reassess their expected activity over the months ahead, we continue to see some retrenchment across the sector, though generally less than in other areas of the economy," Phil Smith, principal economist at IHS Markit, said.