Outlook for construction sector in EU – EUROFER

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EU construction output growth in 2017 surpassed previous estimates and grew by 4.8% in 2017. Construction activity in the first quarter of 2018 is estimated to have risen by 3.6%. EU construction activity remained robust in the fourth quarter of 2017. Output grew by 4.8% year- on-year, the same growth as registered over the third quarter. This implies that in 2017 total activity in the EU construction sector rose by 4.8%, the strongest growth in about a decade. Since 2016, the sector has been witnessing a cyclical rebound from the deep and long downturn dating back to the global financial crisis. Last year the rebound gained further momentum.

Construction industry growth in 2017 and the first quarter of 2018. While initially the construction upturn was confined to Germany, Sweden, the Netherlands and the UK, over the past two years it spread to the other EU countries. This is particularly true for France and Poland.

The major growth driver in Western Europe remains the surge in demand for new housing and for residential renovation and modernisation. Demand for housing has also been fuelled by the migrant inflows into several EU member states over the past few years.

In 2017 non-residential construction activity growth gained significant momentum as well, owing to rising demand from both the private and the public sectors. On a par with the EU and global economy gaining strength, particularly investment in logistic infrastructure – logistic hubs, intelligent warehouses, etc. – has been quite robust. Other private sector investment includes shopping malls, leisure centres and smart offices, whereas public investment benefited from increased government spending on buildings for public services.

Civil engineering projects and related activities were the major driver in the Central European region. Poland, the largest construction market in the region, returned to growth in the second half of 2017 on a par with the increased likelihood of the release of EU funds. EU construction activity is estimated to have grown by 3.6% in the first quarter of 2018. Only in the UK, Germany and Hungary activity weakened compared with the same period of 2017.

Construction industry forecast 2018-2019
Construction demand looks set to rise gradually further in 2018 and 2019, driven by solid private and public demand for building and civil engineering projects. Residential demand will benefit from robust levels of consumer confidence, rising household income and the still low cost of finance. Migrant inflows have led to tight supply of housing in several EU member states. Private demand for commercial and industrial construction will be boosted by renewed investment following a relatively long period of underactivity. Improving budgetary conditions across the EU countries will allow government to investment more in non-residential and civil engineering projects.

Some countries that had witnessed an early revival of construction sector activity face a slowdown in output growth, not only due to the boost from pent-up demand gradually drying up, but also because of supply-side constraints in the construction sector such as lack of capacity and labour shortages.

Total EU output is forecast to rise by 2.8% in 2018 and by 2.2% in 2019. In the UK, activity growth is expected to be rather sluggish due to firms withholding investment decisions as they await the outcome of Brexit negotiations.

Posted By : Nanda Koijam on Thu, 10 May 2018

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