Key Findings:

  • Slower, but still notable, fall in construction activity
  • Rate of decline in new orders eases to weakest in three months
  • Firms record optimism towards year-ahead outlook

Italy’s construction sector remained in a downturn during September, according to the latest PMI® data from S&P Global. Total construction activity declined amid a further fall in order book volumes, though the pace of contraction eased sharply in both cases.

More positively, constructors registered renewed optimism towards the year-ahead outlook for output in the final month of the third quarter, reportedly linked to hopes around the resumption of the superbonus scheme.

The headline S&P Global Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry activity – posted 46.7 in September, up from 41.2 in August, to signal a third consecutive monthly reduction in construction activity across Italy and one that was sharp overall. That said, the latest figure was the highest in the current sequence of decline, indicative of a slower pace of contraction.

At the sector level, positive news came with respect to commercial construction activity, which returned to growth following a two-month decline, while the rate of contraction in residential construction eased to just a fractional pace. Elsewhere, civil engineering activity dropped further, with the latest fall amongst the most marked on record.

September data pointed to further evidence of weak demand conditions, as inflows of new orders fell for the fourth month in a row. Panellists cited issues around the superbonus scheme and weak client demand. However, the rate of reduction eased notably since August and was mild overall.

A weak pipeline of new work nonetheless led Italian construction firms to pare back on input buying in September, extending the current sequence of decrease to three months. The latest fall was moderate overall and the slowest in the aforementioned sequence.

Lower demand for inputs did little to temper supply disruptions at the end of the third quarter, however. Average lead times for inputs lengthened to the greatest degree since May. Delays were attributed by panellists to material shortages.

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– International Construction Exhibitions – UK Government Support for Exhibiting Overseas – Identifying Suitable Markets – Agent or Distributor – International Project Lead Sources

At the same time, Italian firms again cut staffing levels in September. The pace of job shedding quickened since August but was still only modest overall. Firms meanwhile registered a sharp reduction in their usage of subcontractors in September.

Turning to costs, September data pointed to a re-acceleration in the pace of input cost inflation. The rate of increase was the fastest for three months and amongst the steepest on record. Greater energy, material and fuel costs were cited by respondents as the primary drivers of the latest uptick in input prices.

Looking ahead, the Future Activity Index registered above the neutral 50.0 mark for the first since June in September, to signal overall optimism towards the year-ahead outlook for output at Italian construction firms. Anecdotal evidence linked confidence with hopes of a revival of demand and a resumption of the superbonus scheme. That said, firms also cited recession risks and surging energy prices as key concerns to the outlook.

Lewis Cooper, Economist at S&P Global Market Intelligence, said, “Construction activity across Italy continued to decline in September, rounding out the worst quarterly performance since the second quarter of 2020, with issues surrounding the superbonus scheme reportedly weighing heavily on both output and demand.

“That said, the latest fall in activity was the slowest in the current sequence, helped in part by a slower reduction in new orders.

“At the sector level, civil engineering construction continued to drop at one of the most marked rates on record, though some positive news came from a sharply reduced fall in housing activity and a return to growth for commercial construction.

“Another positive development from the September PMI data was optimism amongst firms towards the yearahead outlook for output for the first time since June. According to anecdotal evidence, hopes the superbonus scheme would resume and lift demand was the principal driver of confidence. That said, recession fears and concerns around surging energy prices continued to weigh on sentiment.”

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