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German Construction Sector Grows Most Since Early 2018

Germany's construction sector grew for a sixth consecutive month in February to its strongest level in over two years, led by a robust residential building activity and an improving commercial activity sector, survey data from IHS Markit showed on Thursday.

The IHS Markit Germany Construction Purchasing Managers' Index, or PMI, rose to 55.8 from 54.9 in January. The latest reading was the best since January 2018. A score above 50 suggests growth in the sector.

Homebuilding growth accelerated for a the fifth consecutive month at its quickest pace in over two years. Commercial construction activity grew for a second month in a row to an 11-month high.

Meanwhile, civil engineering activity continued to fall, but the decline was marginal.

The overall increase in construction activity in February was partly due to the unseasonably mild weather. Consequently, new orders grew for a fourth straight month. Stronger demand led to greater tender opportunities. That said, new order growth slowed from January's 11-month high.

Job creation continued and was the quickest since the first quarter of 2019. Purchasing activity increased markedly, at the steepest rate since June 2018. Lead times increased further.

Purchase prices rose sharply and was the highest since March last year. An increase in sub-contractor charges, partly due to deteriorating availability, also led to higher cost inflation.

Constructors remained confident about the outlook for activity and the degree of optimism improved from January.

"We saw a similar situation in 2019, when the mild-weatherinduced upturn in the opening quarter was subsequently met with some payback in the following months," IHS Markit Principal Economist Phil Smith said.

"A potential correction in activity levels will be something to watch out for as we move through spring and into the summer."

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