Construction output in the European Union will decline more sharply in 2010 than previously expected, i.e., by 2.4 percent, while improving economic conditions in 2011 will result in activity growing by 3.4 percent, according to the Economic and Steel Market Outlook 2010-2011/Q2 2010 Report from EUROFER's Economic Committee, released by the European Confederation of Iron and Steel Industries (EUROFER).
The year 2010 started for the EU construction sector on a very weak note. Low temperatures and heavy snowfall in January and February and a wet March seriously hampered construction activity across the EU. This resulted in total output falling by more than eight percent compared with the already weak level of activity registered in Q1 2009, the seventh consecutive quarterly decline in production.
At country level, only some smaller EU markets managed to escape the downward trend in output.
The report suggests that the second quarter should bring a relative improvement in output. As soon as the weather improves, most projects which had been halted temporarily because of the weather conditions will be revived. This will probably limit the downturn in construction activity to almost 1.5 percent year on year in the second quarter, EUROFER says.
Looking further ahead, the outlook for the construction sector is bleak. During 2009, increased government spending on infrastructure projects helped to offset - at least partially - the decrease in residential and non-residential building activity. While so far mainly spending on renovation and modernization of motorways and other transport-related projects has risen in recent months, high hopes were pinned on increased investment in large-scale, new infrastructural and public non-residential projects stimulating construction activity in the course of 2010. However, the urgent need to address the fiscal deficit in a number of EU countries will probably trigger serious budget cuts and reduce the supportive role of infrastructure activity.
Spain has already announced that its austerity program will directly affect several infrastructure projects planned for 2010-11.
Meanwhile, prospects for the residential sector remain sluggish; the outlook is for a slow improvement in new housing starts from very low levels. Prospects are slightly better for renovation and modernization activities, particularly those related to improving the ecological footprint of homes.
EUROFER expects non-residential construction activity to suffer from a further reduction in business investment and continued difficult access to finance. The main exception is energy-related and sustainable construction.