Key Findings:

  • Weak demand weighs on sector performance
  • Falls in commercial and housing activity
  • Lower cost inflation supports rise in sentiment

Italy’s construction sector remained inside contraction territory at the start of 2023. Total activity and new orders both continued to fall, amid reports of weak underlying demand and ongoing uncertainty over the government’s superbonus scheme. Purchasing activity was subsequently cut at an accelerated rate.

That said, there were some positive developments during the month, with employment growth recorded and a noticeable uplift in confidence. Input price inflation dropped to its lowest level for over two years.

The headline S&P Global Italy Construction Purchasing Managers’ Index® (PMI®) – which measures month-on-month changes in total industry activity – remained below the 50.0 no-change mark during January for a second successive survey period. Posting 48.2, up from 47.0 in December, the index pointed to a modest contraction of activity at the start of the year, and one that was smaller than in the previous survey period. Sector data revealed slower falls in both commercial and housing activity, whilst ongoing growth was recorded in civil engineering. For the latter, growth has now been registered for three months in succession, and the latest increase was the best since March 2022.

Nonetheless, at the aggregate level, activity continued to be limited by falls in new orders. January signalled a fifth fall in the past seven months amid ongoing evidence of weak underlying demand and a lack of new tenders coming to market. Uncertainty with regards to the government’s superbonus scheme added to downward pressure on sales and led to a noticeable retrenchment in purchasing activity. Latest data indicated that buying was reduced to the greatest degree since April 2020. And lower purchasing subsequently led to lower pressure on vendors and helped explain the weakest lengthening of lead times for the delivery of inputs for over two years. That said, supply chain frictions continued to persist in some instances, according to panellists, with constructors pointing to ongoing stock shortages at vendors in January.

The Exporting from the UK section of the Construct UK Directory includes
– International Construction Exhibitions – UK Government Support for Exhibiting Overseas – Identifying Suitable Markets – Agent or Distributor – International Project Lead Sources

On the price front, price inflation maintained its recent downward trend. Overall, input costs rose to the lowest extent since the end of 2020. However, costs faced by Italian constructors are still increasing at a historically elevated pace and have now risen for 32 months in a row. Firms noted that prices paid for raw materials remained elevated.

Companies are hoping that inflation continues its downward trajectory over the coming 12 months. This would help support greater market stability and a renewed upturn in new orders for Italian construction projects. The government’s National Recovery and Resilience Plan was also cited as a source of potential growth in the next year. Overall, confidence in the outlook subsequently moved noticeably higher at the start of the year and hit its highest level for eight months. 

Paul Smith, Economics Director at Global Market Intelligence, said, “January’s PMI data pointed to another month of falling construction activity, with sector performance undermined again by a drop in new orders. Ongoing uncertainty over the superbonus scheme and generally subdued market demand is weighing on sales and resulting in few tender opportunities for constructors.

“Firms are understandably therefore taking a cautious approach to purchasing, cutting their buying to the greatest degree since the lockdown induced declines in the spring of 2020. However, amid hopes of reduced purchase prices, firms are signalling a greater degree of confidence about the future, with confidence bouncing in January to an eight-month high.”

For further details, click here.

The Construct UK Sales & Marketing Directory hosts over 75 articles, 1,000 construction events and 30 different databases for download. The annual £195 (+VAT) subscription fee provides unlimited access to all resources on the site.

Keep up to date with the latest construction marketing news by registering for our regular free construction sales and marketing e-bulletin here.

Follow us on Twitter