Key Findings:
- Sharp decline in activity coincides with solid reduction in new work
- Renewed drop in jobs sees strongest round of shedding in over six years
- Rate of input price inflation slows further, but remains elevated
After having moved closer towards stabilisation in May, the Italian construction sector contracted at a sharper pace in June. Faster declines in output and new orders encouraged firms into retrenchment mode, lowering employment for the first time in 22 months and at the quickest rate in over six years.
A fresh decline in input buying was signalled and although cost pressures remained sharply elevated, they retreated to their softest in four months.
At 45.4, the headline Italy Construction PMI® Total Activity Index — which measures month-on-month changes in total industry activity — dropped further below the crucial 50.0 mark, signalling a sharp contraction in construction activity in June. This compared unfavourably with May’s reading of 49.4.
Lower activity reflected reduced demand for construction work, stoppages due to delivery delays and fewer working hours caused by extreme temperatures.
The decline in activity was broad-based by sector. Although still signalling a contraction, commercial topped the rankings in June. In stark contrast with May, civil engineering came in at the other end of the scale as output fell at the strongest rate in 16 months and rapidly.
Underpinning the decline in activity was a sustained contraction in new orders in June. The latest reduction was the fourth in successive months, faster than in May and solid in nature. Raised levels of uncertainty around the Middle East war and elevated cost pressures reportedly acted to deter sales.
Both employment and input requirements were lower as a result. The fall in jobs ended a 21-month trend of expansion and was the most marked in just over six years. Some firms mentioned that staff leavers were not replaced, while others linked the decrease to the completion of building sites.
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Purchasing activity also fell at a similarly moderate rate. In addition to generally subdued demand conditions, some panellists noted that they had lowered buying amid efforts Civil Engineering to contain costs.
Average cost burdens facing Italian construction companies increased rapidly again, as the war in the Middle East acted to drive raw material and oil prices higher. The rate of inflation retreated noticeably again from April’s four-year high to its lowest since February.
Instances of disruption to transport routes and material shortages reportedly contributed to another lengthening of average wait times on input deliveries in June. The decline vendor performance was sharp, but the least marked since February.
Italian constructors’ growth expectations for the coming year were only just net positive in June. Confidence dropped over the month and fell further below the historical trend level. Weighing on the outlook was uncertainty caused by the conflict in the Middle East and the planned deadline for the National Recovery and Resilience Plan (PNRR).
Eleanor Dennison, Economist at S&P Global Market Intelligence, said, “The Italian construction sector was unable to sustain the path to recovery suggested by May data during June. At least part of the sharp reduction in activity can be attributed to extreme heat, but mostly linked to subdued demand conditions. Pressure on costs and supply chains persisted but to lesser degrees than in recent months.
“June PMI data showed a slump in orders, which in turn triggered fresh reductions in purchasing and employment. The decline in jobs was the greatest in just over six years, providing a negative signal regarding firms’ expectations for the year ahead.
“The mid-2026 National Recovery and Resilience Plan (PNRR) deadline has been a great source of uncertainty among Italian constructors in June. Adding to the pressure brought on by the situation in the Middle East, confidence levels among firms across the sector lingered around the neutral mark.”
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