December: +0.3% m/m, +7.8% y/y
November: +0.2% m/m (revised from +0.8%)
October: -1.1% m/m (revised from -1.4%)
September: -1.4% m/m (unrevised)
August: -0.2% m/m (revised from -0.2%)
July: +1.2% m/m (revised from +1.7%)
—

PARIS (MNI) – Construction activity in the Eurozone recovered
further in December, Eurostat estimated Friday, although available data
showed declines in most reporting countries.

After a 0.2% upturn in November, the 0.3% monthly rise gave a 7.8%
gain on the year, skewed higher by the base effects of the early-winter
slump a year before. Due to steep declines in previous months, 4Q output
was down 1.8% after modest gains in 3Q and 2Q. December’s level was more
than 20% below the highs seen before the slide of the past three years.

The recovery at the close of last year was due entirely to building
activity, which rebounded 0.8% in November and gained another 1.5% in
December. Civil engineering, by contrast, has contracted since July,
with a 2.6% drop in December. (The latest seasonally adjusted monthly
estimates are based on data from only seven of the Eurozone’s 17 member
states.)

Clement weather at the end of last year no doubt contributed to the
seasonally adjusted upturn in building. Construction followed other key
sectors into the cyclical downturn with about a half-year lag and there
is no reason to expect it to recover earlier. The latest available data
on Eurozone building permits show a slight decline in 3Q, separate
Eurostat data show.

Other indictors point to a short-term recovery as well. Builders’
assessment of recent activity in January was less negative than towards
the end of last year, according to the European Commission’s survey.
Again, this could be merely a weather-related effect, as their
assessment of order books continued to erode.

The monthly survey by the magazine Construction Europe flagged
“another marginal improvement” in sector sentiment in February. While
this is a “normal seasonal pattern,” it is “particularly welcome given
there was a pronounced dip in current activity over the previous three
months,” the editor commented.

For the medium term, however, economic fundamentals are hardly
promising. Sluggish business activity, tighter public budgets, tougher
borrowing conditions and dismal sector and consumer sentiment do not
argue for a pick-up soon.

This is also the assessment of the sector research network
Euroconstruct, which sees activity in Europe contracting somewhat
further this year and only a very gradual recovery next year. The
scenario implies a steeper drop in the Eurozone due to the pronounced
weakness in the southern rim countries and Ireland.

In Germany, activity plunged 6.4% in December, but was 44.3% higher
than during the slump a year earlier. Thanks to solid gains over the
previous two months, 4Q posted a 0.2% recovery. The German statistics
office reported a marked pick-up in construction investment in 4Q.
Medium-term prospects have improved markedly in recent months,
approaching the high levels seen early last year, according to the Ifo
institute.

Home building in Germany should continue to attract investors
fleeing riskier assets, but slowing economic activity will dampen
commercial construction and public stimulus measures have already been
unwound. The German construction association HDB expects total sales to
grow by just 1% this year in real terms after +6.5% last year, with
residential building up 6%, commercial construction up 3% and public
activity down 2.5%.

In France, activity fell back 2.2% in December to post a 0.8%
decline for 4Q. The national statistics institute Insee, by contrast,
estimated that 4Q activity expanded by 0.4% after +0.8% in 3Q.

Construction sentiment in France has so far held up better than in
other more cyclical sectors and firmed slightly in January to return to
the long-term average, Insee said. But this was due mainly to the upturn
in recent activity, whereas prospects for the near term remained rather
gloomy. Insee expects output to decline by 0.3% in both 1Q and 2Q.

Spanish construction bounced back 1.1% in December for a 1.5% gain
on the year. Activity fell back 1.5% in 4Q after a solid recovery in 2Q
and 3Q. The bloated housing market is likely to remain a drag this year,
as demand for mortgages declined last year and higher borrowing costs
could prolong the crisis, as the overhang of unsold homes is estimated
at close to half a million. The RICS institution of surveyors sees
little grounds for optimism for the year ahead.

As usual, no results for Italy were available for the reporting
month. Activity fell rebounded 3.1% in November, but was still 2.4%
lower on the year. Sector sentiment has been on an uneven upward trend
since the trough in early 2010 and was bolstered in January by rising
orders for building, according to Istat.

Elsewhere, construction in both the Netherlands and Portugal fell
back 0.2% in December, giving annual changes of +1.3% and -10.8%,
respectively. Activity was down 8.1% on the month in Slovenia and 21.9%
lower on the year. Slovakia posted a monthly rebound of 3.8% for an
annual rise of 7.5%.

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

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