More construction growth forecast

15 April 2008

Strong growth in the civil engineering sector is expected to offset weakening residential construction to give further increases in construction output in Europe over the next three years. Gains in civil engineering are expected to help take to average construction output growth in the 19 Euroconstruct* countries to around +1,7% per year until at least 2009, despite the slow down expected in the housing market.

According to Euroconstruct, construction output in Europe grew +3,2% in 2006 to reach € 1349 billion – the 13th year of uninterrupted growth. The growth recorded in 2006, which was announced at Euroconstruct's 30 November conference in Munich, Germany is 0,8 points higher than the +2,6% predicted at the group's June 2006 conference.

Nonetheless, Euroconstruct believes that growth in 2006 marks the peak in the current growth cycle. While further growth is expected, it will be at a slightly slower rate. Construction output is expected to rise +2,2% in 2007 to € 1378 billion. But gains in 2008 and 2009 are expected to slow to +1,5% and +1,4%, respectively, to give the sector a value of € 1418 billion by 2009.

Sector Variations

In recent years solid growth in the residential construction sector has continually outperformed the average rate of construction growth in the Euroconstruct area. However, the latest report from the group suggests that growth in the sector will be at a lower rate of +1,5% – below the average rate of growth – between 2006 and 2009.

Euroconstruct expects the residential sector to remain steady in 2007. The drop off felt more from 2008 onwards when countries which have been longstanding drivers of growth, such as Spain, Ireland and France, are forecast to show declining demand for housing.

Prospects for the civil engineering sector are better with an average growth rate of +3,0% predicted for 2006 to 2009. Euroconstruct has said that this growth is being led by activity in Eastern Europe, Ireland and Spain.

Investment in private and commercial buildings in the Europe between 2006 and 2009 is expected to generate an average growth rate of +2,0% in the non-residential construction sector.

Big 5

The five largest construction markets in Europe – France, Germany, Italy, Spain and the UK – represented 73% of the construction market in the Euroconstruct area in 2006. In 2006, Spain and France were the strongest performers, with growth rates of +5,8% and +4,5%, respectively, but in 2007 the rate of gain in Spain is expected to slow to +4,1% and in France drop to +1,7%.

Germany recorded its first rise (+1,6%) in construction last year after more than a decade of decline and the growth is forecast to continue in 2007 at around +1,2%. The UK construction sector is expected to improve on last year's +0,6% gain with an increase of +2,6%. Italy's construction sector is expected to remain static in 2007 and after gains of just +0,2% last year.

Best Of The Rest

Strongest growth in 2006 was recorded in Slovakia (+10,8%), Poland (+9,9%), Ireland (+7,9%), Belgium (+7,0%) and Sweden (+6,9%). Gains in 2007 are not forecast to be as high but Euroconstruct expects the biggest gains to be in Poland (+8,5%) and Sweden (+5,5%).

The only country which recorded a decline in construction in 2006 was Portugal with a drop of -5,7%. Further losses are expected in 2007 at around -3,9% but Euroconstruct believes the country's construction sector will return to growth in 2008 with +0,8% growth, followed by gains of +1,5% in 2009.

From 2008 Euroconstruct believes that construction recessions will become more common with losses predicted for Ireland (-2,6%), Finland (-1,4%) and Italy (-1,0%) in 2008.

&#bull; Euroconstruct is a group of economic forecasting companies based around Europe. The 19 countries surveyed by the network are: Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, the Netherlands, Norway, Poland, Portugal, the Slovak Republic, Spain, Switzerland and the UK. For more information, visit www.euroconstruct.org

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