European construction to fall –7,5% this year

By Chris Sleight10 June 2009

Revised forecasts from Euroconstruct show European construction output will fall -7,46% this year. This is a significant downgrade from the group's previous forecast, released in December, which pointed to a -4,30% drop. Last year construction activity in Europe fell -3,08% from the 2007 peak output of € 1,53 trillion.

Euroconstruct has made downward revisions to almost all of the 19 countries' construction outputs it monitors. The only positive changes were seen in Switzerland, where growth of +1,60% is expected this year compared to the previous forecast of +0,81% and Hungary, where the expectation is now for a -3,21% fall in activity this year as opposed to the previously forecast -3,82% drop.

At the other end of the spectrum, Euroconstruct has made some significant downward revisions. Most striking is Ireland, where a massive -34,62% fall in construction is forecast this year. Another striking change is in the forecast for Portugal, where a -10,01% drop in activity is now predicted for 2009, compared to the previous outlook of +0,40% growth.

Big 5

The recession will be most keenly felt among the ‘Big 5; markets of France, Germany, Italy, Spain and the UK, with a -8,08% drop in activity expected this year, following on from the -4,15% decline seen in 2008.

The major contributor to this is Spain, where construction output is forecast to drop -18,73% this year, following a -17,28% fall in 2008. With another -6,14% decline expected in 2010, Euroconstruct sees this construction market falling by a third from the peak of € 223 billion in 2007 to € 140 billion next year.

Elsewhere among the Big 5, the declines for Italy and the UK this year are seen as being more or less in line with the wider region, at -7,50% and -7,45% respectively. The downturn will be less pronounced in France and Germany where falls in output of -5,46% and -3,70% are expected.

The downturn in Western European construction this year is put at -7,98%. The downturn in the ten other Western European construction markets followed by Euroconstruct is set to be a little less severe than among the Big 5, where a -7,66% fall is forecast.

All markets except Switzerland are expected to see a fall in construction output this year, with the decline being most pronounced in Ireland, Finland and Portugal.

CEE

In contrast, the Central & Eastern Europe (CEE) region is expected to see moderate growth of +1,24% this year, although again this is a downward revision of December's +4,84% growth forecast.

Although construction output is expected to fall -3,23% in the Czech Republic, -3,21% in Hungary and -4,25% in Slovakia this year, +5,51% growth in the region's largest market, Poland, means a positive outlook for the CEE region as a whole. However, with the region seeing construction growth increase around +8% for the earlier part of this decade up to 2007, this year's +1,24% growth marks a significant slowdown.

Outlook

Looking ahead to 2010, Euroconstruct expects the European construction market to suffer about another -1% fall in output. Growth in the CEE region is expected to bounce back to +6,34%, but a decline of -1,52% is forecast for Western Europe.

Growth is expected to return to the region as a whole in 2011, with about a +1,6% increase in total construction activity. While the CEE countries are expected to boom again, with growth up above +10%, the recovery in Western Europe is expected to be much more moderate at just +1%.
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