The eurozone’s construction sector is suffering its worst decline since the pandemic brought the economy to a near halt in 2020, according to the latest closely watched monthly survey.

The bleak results underscore how rising borrowing costs, sharply rising raw material prices, and fears that a recession could accelerate the decline in real estate prices are all weighing on the European construction industry.

The S&P Global Eurozone Construction Purchasing Managers’ Index for December, released On Thursday, the overall activity index showed 42.6, down from 43.6 in November. Numbers below 50 indicate declining activity.

The data represents the eighth consecutive month of contraction in home construction. Activity fell in the largest economies of the 20-country bloc – Germany, France and Italy.

The figures, based on a survey of purchasing managers at 650 construction firms, are the latest sign of waning activity in European economies affected by the coronavirus. The war in Ukraine and the resulting rise in energy and other costs.

The construction sector ended 2022 on a “negative note,” said Laura Denman, an economist at S&P Global Market Intelligence, with a “sharp drop” in construction activity.

The final three months of 2022 mark the index’s worst quarterly performance since the April-June quarter of 2020, when construction activity was disrupted by pandemic.

Excluding Covid-19 lockdowns, total homebuilding activity fell at the highest rate since March 2013 and new orders for all construction projects fell at the fastest rate since September 2014, S&P said. The largest decline in both cases was in Germany.

She added that commercial buildings activity also declined for the ninth consecutive month, adding that the largest decline was in France.

“The December data indicates that companies expect continued challenging economic conditions into the future,” Denman said. She added, however, that there is “continued mitigation” in both cost and supply pressures.

Overall output in the construction sector in the eurozone has recently rebounded again above pre-pandemic levels, Height 2.2 percent in the year to October, according to figures from the European Union’s statistics agency.

But builders warn of its potential collapse and are calling for more government investment to make homes more energy efficient.

Tim-Oliver Müller, president of the German Building Industry Association, warned last month that many of its members were “struggling to survive due to high prices for building materials and energy”.

A recent study by the Ifo Institute in Munich found that 16.7 per cent of German builders experienced construction project cancellations in November, up from the usual rate of just 1 to 2 per cent. New home building orders in Germany fell 14 percent in October from a year earlier, according to the federal statistics agency.

Construction generates about 9 per cent of the eurozone’s output, so the fact that many construction firms are worried about declining activity and shrinking order books is a bad omen for the bloc’s overall economy, which is expected to suffer a mild recession this winter.

The construction sector is definitely among the most interest rate sensitive sectors, said Florian Hens, chief economist at Union Investment, a German fund manager, so if you raise prices, construction activity is expected to be affected early on, especially when raw materials inflation is still there. high.”