Seasonally adjusted data:

April: -2.7% m/m, -5.0% y/y
March: +11.4% m/m (revised from +12.4%)
February: -9.8% m/m (revised from -10.4%)
January: -0.7% m/m (revised from -0.5%))
December: -1.6% m/m (revised from -2.0%)
November: +1.8% m/m (unrevised))
—

PARIS (MNI) – Eurozone construction fell again in April after a
sharp rebound in March had retraced most of the slide since the start of
the year, Eurostat estimated Tuesday.

The 2.7% monthly downturn left activity 5.0% lower on the year and
some 20% below levels seen in 2007. April was only 0.8% above the 1Q
average, which had dropped 4.0% on the quarter.

Building activity alone, which fell 3.8% in 1Q, was down 2.7% on
the month and 4.7% lower on the year. Civil engineering slipped 1.1% in
April after a 4.1% drop in 1Q and was down 6.2% on the year.

The construction sector has never really recovered from the crash
in 2008 and may be dragged down faster as the economy slumps. However,
the overall picture masks great core-periphery divergences, and spotty
data on permits and orders suggest these trends will continue. Builders
remain pessimistic on the whole, the European Commission’s surveys show.

Eurozone housing investment is likely to contract further this year
“before moderate growth sets in 2013,” the Commission predicted last
month. “The positive impact of the improving situation of private
households will be partly offset by the negative impact of fiscal
consolidation on the government component in construction investment.”

In Germany, where activity had rebounded 26.0% in March, more than
retracing the crash in February, April brought a 6.0% setback for a 0.5%
decline on the year. Activity has expanded faster here than in any
reporting country since the middle of the past decade. Rising prices,
favorable financing, demand for housing and promising investment returns
all argue for further growth.

While German construction firms polled by the Ifo institute are no
longer quite so optimistic about near-term prospects, the Bundesbank
expects activity to continue expanding, citing the 9% annual rise in
building permits over the past six months. The construction association
HDB expects home sales to rise by 7% this year and commercial sales by
5%, more than offsetting a 1% contraction in public works.

Italian construction fell back 4.4% on the month after a 10.1%
upturn and was 15.1% lower on the year. The modest recovery in sector
sentiment appears to have stalled, and May brought a setback to
five-month low, Istat’s surveys show.

Measures to bolster sector activity were a key part of the stimulus
package announced by Italian Prime Minister Mario Monti last week. New
buildings will be exempt from property taxes for three years; homeowners
will be able to deduct from taxable income half the cost of renovation
outlays (up from 36%), and firms specialized in transport
infrastructures will be able to issue bonds.

In France, by contrast, activity expanded 2.3% in April after a
17.1% rebound in March to stand 3.2% higher on the year. But builders
surveyed this month said recent activity had lost steam and were much
more downbeat about order books.

In line with the outlook of many realtors, the OECD expects French
housing prices to come down by around 10% over the next two years.
Demand is flagging due to cutbacks in public supports, tighter credit
and weaker income prospects. The downward trend in home building could
be attenuated by the new government’s plans to accelerate the
construction of subsidized low-rent housing.

After contracting by 4.8% in 3Q and 6.2% in 4Q, Spanish
construction fell 2.3% in April and was 14.6% lower on the year. The
bloated housing market will remain a drag on activity for the
foreseeable future. Builders polled by the Commission in May said recent
activity had contracted sharply, which, along with weaker orders, helped
pull sector sentiment down toward the record low of last September.

With Spanish credit conditions tightening, housing demand remains
sluggish despite falling prices. Banks are likely to aggravate the
situation as they unload real estate assets. After an 11% drop in prices
last year, the Commission expects a further decline in the short term,
“paving the way for further adjustment of the housing sector and
possibly a slight reduction in the large stock of unsold houses.”

Only four other Eurozone countries reported results for April.
Activity was down 1.3% in the Netherlands, down 6.7% in Portugal, down
9.3% in Slovenia and down 2.3% in Slovakia. Annual declines ranged from
9.1% for the Netherlands to 15.1% for Slovakia.

Most recent results for Greece showed 1Q activity 9.1% lower on the
year. In Ireland, the annual decline in 1Q was 11.7%.

–Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com

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