The European Confederation of Iron and Steel Industries (EUROFER) has revised its European construction industry output forecast from a 2.8 percent fall to a decline of three percent in its fourth quarter report of the ‘Economic and Steel Market Outlook 2010-2011', while the previous increase forecast of 2.6 percent for the growth in European construction output in 2011, is revised down to 2.1 percent.
Assessing the performance of the European construction sector, EUROFER said that following a very weak first quarter in terms of overall construction activity in Europe due to severe weather conditions, output in the EU bounced back to less depressed levels in Q2. Projects which had been halted temporarily were restarted. Nevertheless, in a year-on-year comparison, European construction activity in Q2 was still 1.6 percent down on 2009, the eighth consecutive quarter of decline.
According to EUROFER, at the country level, Spain remained in a construction crisis of unprecedented proportions with output again falling sharply. In contrast, activity in Germany, Sweden and Poland was stronger than a year ago. Despite the relative improvement in activity compared to the first quarter of this year, construction confidence deteriorated during the second quarter and over summer, reflecting increasing pessimism on the current business situation and on expectations for the coming months.
In most EU countries order intakes remained on a downward trend, said EUROFER, particularly orders from the private sector for non-residential buildings for industrial or commercial purposes. However, it is becoming more and more evident that the public sector has also started to reduce investment. These trends will set the stage for the construction sector in the remainder of this year and into 2011.
Work in progress will be gradually drying up, whereas the impulse from new projects is lacking. Severe cutbacks in public spending have been announced by most EU governments. Under the current market conditions, particularly the non-residential sector will bear the brunt of reduced investment, both from the private as well as from the public sector.
According to EUROFER, the downturn in the residential sector looks set to bottom out in 2010, although in some countries, most notably Spain, huge inventories of unsold residential properties imply that the downturn has still not run its full course.
Civil engineering has been the least affected construction sector to date, but government austerity programs will most definitely depress output this year and next year. However, in Central Europe, EU funds should be supportive in securing infrastructure activity.