The latest Hamburg Commercial Bank (HCOB) Purchasing Managers� Index (PMI) survey data recorded a score of 42.9 December, where anything below 50.0 signals a decline. That was up slightly from November’s score of 42.7.

Activity has now fallen in each of the last 32 months, according to the survey. Demand in the sector continued to be weak, with new orders falling for the 33rd consecutive month.

As a result of the subdued demand, companies scaled their employment back in December, with staffing levels falling for the 22nd month running, according to the survey.

Dr Tariq Kamal Chaudhry, economist at Hamburg Commercial Bank, said, ““The eurozone construction sector continued its recession as the HCOB PMI brought no positive news for the sector in December. The contraction that has persisted since May 2022 and continued into the year’s end. The overall decline in economic activity reflects sharper downturns in Germany and France, with Germany bearing the largest share of the current woes. Italy, however, bucked the trend and recorded its first increase in economic activity since March.

“Housing activity is in deep crisis, shrinking disproportionately compared to commercial and civil engineering activities. Meanwhile the decline in the commercial and civil engineering sectors was less severe than the previous month, with both recording the smallest decline in seven months. To revive the residential property sector, significant interest rate cuts by the ECB would likely be necessary soon.�

Dr Chaudry said the Eurozone is looking ahead “with pessimism� and forecast that it is “unlikely to significantly reduce the downward pressure in the sector�.

HCOB Economics is forecasting two interest rate cuts by the European Central Bank by spring 2025 but views further cuts during the year as unlikely, due to increasing price pressures.

Growth in UK slowing

Meanwhile, buyers in the UK indicated in the S&P Global UK Construction PMI that output eased to a six-month low in December.

The index scored 53.3 in December, with growth slowing from the 55.2 recorded by the index in November.

Commercial activity was the fastest-growing area of the construction sector in December (index at 55.0), followed by civil engineering (52.9). But both categories slowed down as compared to November.

Residential work was again the only category to register an overall decline in output during December (47.6). Housebuilding activity has now decreased for three consecutive months and the latest reduction was the fastest since June 2024. Survey respondents blamed subdued demand conditions, elevated borrowing costs and weak consumer confidence.

Tim Moore, economics director at S&P Global Market Intelligence, said, “December data highlighted a loss of momentum for construction output growth, with all three main categories of activity posting weaker performances than in the previous month.

“The slowdown in overall construction output growth reflected more subdued demand conditions in recent months, as illustrated by a further moderation in new order growth during December. Survey respondents commented on headwinds from elevated borrowing costs and the impact of fragile consumer confidence.

“Many firms reported worries about cutbacks to capital spending and gloomy projections for the UK economy.�