April: -0.3% m/m, -6.1% y/y
March: +6.5% m/m (revised from +7.6%)
February: -6.3% m/m (revised from -7.2%)
January: -2.0% m/m (revised from -1.7%)
December: +0.3% m/m (unrevised)
November: -1.1% m/m (unrevised)
—

FRANKFURT (MNI) – Construction activity in the Eurozone fell back
in April, as weakness in building construction more than offset the
acceleration in civil engineering growth, Eurostat reported on Thursday.

Taking into account the downward revision to March’s rebound, the
0.3% decline in April left output 6.1% lower on the year.

Building construction saw a downward correction in April after a
strong jump in March, slipping 0.9%, for a decline 6.0% on the year.
Civil engineering jumped 3.4% in April, adding to March’s modest
rebound. Still, civil construction was down 6.5% annually

After remaining stable in April, construction sentiment eroded in
May, with builders’ assessment of order books and activity trends
worsening, the European Commission reported.

Muted housing demand is expected to keep residential construction
activity subdued this year, with further adjustments likely for
countries such as Spain, the Commission forecast.

The outlook for non-residential investment this year, however, is
more positive, “largely on account of government-financed infrastructure
projects thereby partly offsetting the weakness on the residential
side,” the Commission added.

The European Central Bank also expects further contraction in the
housing market, as suggested by the falling number of building permits
issued.

“However, a gradual easing in the pace of the contraction can be
expected, as this reduction was smaller than the decline seen in the
previous quarter,” the ECB argued in its latest Monthly Bulletin.
“Moreover, the negative impact on construction stemming from the
unusually adverse weather conditions during last winter can be expected
to be reversed later in the year.”

While falling short of its near 25% jump in March, the German
construction industry still saw its spring revival continue in April,
with output rising 2.6%, leaving the two-month average growth rate at
26.1%. On the year, production was up 4.8%.

However, production was unable to maintain its gain in May, firms
cited in the latest construction purchasing managers index (PMI)
reported. With both output and new orders contracting, the PMI fell back
to 48.6, while firms’ pessimism regarding the next 12 months fell to its
lowest level since December.

The PMI findings were echoed by those of the Ifo institute, whose
business climate index for the construction sector fell to four-month
lows last month.

Construction output in France fell 2.2% on the month, more than
fully undoing March’s rebound and bringing the annual decline to 6.9%.
After a slight improvement in April, firms’ assessment of future
activity deteriorated in May, with new orders still seen as trending
below normal, Insee reported.

In Spain, construction declined an additional 4.9% on the month,
widening the annual decline to -18.5%. Slowing investment growth in
housing projects will likely lead to construction output falling by 10%
this year and by 3.25% in 2011, the Commission predicted. However, this
should help reduce the large stock of unsold dwellings, thereby
benefiting future production as economic prospects improve.

Monthly data for Italy were not published. The Commission noted a
growing majority of companies less than optimistic regarding the
business climate. New orders levels were further below normal levels,
leaving firms to assess activity trends negatively.

–Frankfurt newsroom: +49 69 720 142; e-mail: frankfurt@marketnews.com–

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