Eurozone construction activity showed signs of moderation in December 2025 as the pace of contraction slowed, largely due to Germany’s marginal growth. According to the HCOB Eurozone Construction PMI data released on January 7, the Total Activity Index rose to 47.4 from 45.4 in November. Despite this improvement, the eurozone construction sector remained in contraction for the 44th consecutive month, reflecting ongoing challenges tied to cost pressures and subdued new business demand.

Regional Disparities and Sectoral Trends Within Construction

Germany stood out by posting its first expansion in construction activity since April 2022, effectively ending a 20-month downturn. Meanwhile, France and Italy saw sharper contractions, with the pace of decline in their construction sectors reaching two-month and four-month highs, respectively. Eurozone residential construction continued to decline but at its slowest rate since May 2022. Commercial construction activity also contracted more gently, and civil engineering showed only a slight decrease, signaling some resilience in specific subsectors.

New orders for construction fell yet again, marking the 45th straight month of decline with an accelerated rate in December. France experienced particularly steep reductions, and Italy saw sharper new order declines compared to November. Germany’s new order drop was less severe, recording the mildest fall since March 2022. Employment levels stabilized across the region, breaking a near three-year streak of job reductions. This stabilization was supported by workforce increases in Germany and Italy, whereas France continued job cuts but at the slowest pace in seven months.

Cost Inflation Pressures and Cautious Industry Outlook

Input price inflation accelerated to a six-month high in December, surpassing the 2025 average levels. France and Italy recorded inflation rates hitting 11-month and seven-month highs, respectively. Germany’s input cost inflation remained elevated but steady. These rising costs combine with relatively high long-term interest rates to create significant headwinds for construction firms across the eurozone.

Confidence within the construction sector deteriorated further, dropping to the lowest point in three months. French construction firms reported their lowest sentiment since October 2014, while Italian companies retained a cautiously optimistic stance on growth prospects amid these challenges.

Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, emphasized that although improvements in residential construction offer some optimism, growth in 2026 is likely to face constraints from soaring construction costs, persistent high borrowing rates, and ongoing weakness in new orders.

Construction: Market Outlook

Eurozone construction activity remains subdued as the sector entered 2026, despite Germany’s positive growth signal. With the Total Activity Index at 47.4 in December marking a contraction streak of 44 months, the market is still under pressure from rising input costs and weakening demand for new projects. Investor and industry attention will focus on cost inflation trends and new order flows, which will shape construction sector performance in the upcoming months.