August: +0.2% m/m, +2.5% y/y
July: +1.8% m/m (revised from +1.4%)
June: -1.1% m/m (revised from -1.3%)
May: +0.1% m/m (unrevised)
April: +0.9% m/m (revised from +0.8%)
March: -0.1% m/m (revised from -0.2%)
—

FRANKFURT (MNI) – Eurozone construction output growth slowed
sharply in August, as gains in France and Portugal were partially offset
by sharp pullbacks in Germany and Slovenia, as well as further weakness
in the Netherlands and Slovakia, Eurostat reported on Wednesday.

Nevertheless, taking into account July’s upward revision, August’s
0.2% rise brought overall production to its highest level since June
2010 and boosted the annual increase to 2.5% from the previous month’s
+2.0%.

Building construction rose 0.4% on the month to bring the annual
change to +3.0%. Conversely, civil engineering slipped 1.1% between July
and August, halving the annual rise to 0.5%.

The latest seasonally adjusted monthly estimates are based on data
from only six of the Eurozone’s 17 member states.

With many Eurozone states suffering from severe austerity measures
and the ongoing effects of the debt crisis, the outlook for the sector
over the rest of this year will be challenging.

Respondents in a survey published jointly by PwC and the Urban Land
Institute earlier this year also highlighted the funding issues that the
industry may soon be faced with, as banks possibly restrict lending to
boost capital ratios in line with the most recent Basel Accords.

“To what extent will Basel III alter the face of real estate
finance? Which stressed European economy will be next to seek financial
aid? How will spending cuts affect the consumer, businesses, and the
fundamental demand for property? These are the questions facing the
industry today,” the survey said.

After a brief recovery, Eurozone construction sentiment fell back
in September to its lowest level since January, with companies’ view of
order books and recent activity trends all revised downward, a European
Commission poll showed.

Sector confidence weakened further this month, Construction Europe
said, citing its survey for October.

“Coming on the back of weak results earlier in the summer,
October’s figures clearly prove that the previous results were not just
a seasonal slowdown, but point to a more fundamental problem,”
Construction Europe said.

“The obvious culprit is the crisis over Eurozone debt repayments,
which has sapped confidence in areas like stock markets.”

In Germany, construction declined 1.2% on the month, reducing the
annual change to +5.2%.

Reflecting a modest improvement from August, the German
construction PMI rose to 50.5 in September. However, with incoming new
business contracting and uncertainty still surrounding the current debt
crisis, companies maintained their glooomy outlook regarding the next 12
months.

Respondents to the latest Ifo survey were also less than optimistic
regarding their short-term outlook, as expectations for the construction
sector fell to one-year lows.

French construction output jumped 3.2% m/m to its highest level
since January and 4.7% higher than one year ago.

However, like in Germany, sentiment in France’s construction sector
also lost ground, as INSEE’s morale indicator looked to signal an
“unfavourable economic climate” for the first time since 2010.

As usual, data for Italy were not released for the reporting month.
However, July’s figures showed that production contracted 0.9% m/m,
extending the run of declines to three months and widening the annual
decline to -6.3%.

Still, ISTAT’s construction survey for August pointed to a start of
an upward trend in sector morale, with employment expectations rising.

Due to the “volatility of [Spanish] current working day adjusted
data series”, Eurostat has ceased to publish construction output for the
country “until further notice”.

Annual data, however, indicated a 0.9% contraction. A Commission
survey noted sentiment in the Spanish construction sector reaching a
record low in September, with new orders, activity trends and employment
expectations all revised downward.

Outside of the big four economies, Dutch construction output fell
0.1%, adding to July’s contraction, though boosting the annual change to
+2.0%. Slovakia saw further losses, as output sank 2.3% and 7.7% on the
month and year, respectively. Slovenian construction decreased 6.6% m/m,
resulting in a y/y change of -32.8%.

Construction activity in Portugal rebounded 7.6% on the month in
August, undoing declines in both July and June and narrowing the annual
decline to 10.0%.

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

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