September -2.1% m/m, -8.1% y/y
August: -0.4% m/m (unrevised)
July: -3.5% m/m (revised from -3.2%)
—

PARIS (MNI) – Construction activity in the Eurozone contracted
sharply in September, reflecting a steeper slide in Spain and a downturn
in other peripheral countries, Eurostat said Wednesday.

The 2.1% monthly drop left activity 8.1% below the depressed levels
a year earlier and more than 20% below pre-crisis highs.

Civil engineering led the decline again in September with a 2.0%
drop that gave a 9.9% annual fall. Building activity slipped another
0.6% on the month and was 7.5% lower on the year.

(The latest seasonally adjusted estimates are based on data from
seven of Eurozone’s 16 member states.)

The 1.7% recovery in 2Q activity was only a partial catch-up after
the 4.1% plunge in 1Q during a particularly harsh winter, especially in
Germany. Results for 3Q show a return to the downward trend, with a 3.4%
quarterly fall.

Despite low borrowing costs, sector activity appears unlikely to
regain dynamism this year, and any recovery next year will be dampened
by the unwinding of public stimulus programs.

Housing permits declined over 3% in 1Q and were nearly 50% below
pre-crisis levels seen in 2007, according to Eurostat. Office building
permits plunged another 13% in 1Q after a 34% drop last year.

Leading indicators point to little relief in the near term. Sector
sentiment as measured by the European Commission recovered marginally in
October, largely reflecting a better recent activity and orders in most
countries.

The October sector survey of the magazine Construction Europe
suggested that the latest improvement was indeed minimal, as only 5.0%
of firms on balance reported stronger activity, down from 5.8% in
September. Nearly a third expected better results at the 12-month
horizon.

Construction in Spain tumbled 3.7% in September, receding further
after an upturn in June ahead of the one-point hike in the VAT on homes
sales at mid-year. Activity was 37.3% below the previous-year level.
Having precipitated the recession, the collapse of the housing bubble is
now holding back the economic recovery.

Spanish builders polled by the Commission reported a partial
recovery in activity and orders in October. However, with a stock of
unsold houses of around 700,000 units, it could be years before market
equilibrium is reached.

Germany posted a 0.4% upturn in September, more than retracing the
dip in August to give a 4.0% rise on the year — the sole annual gain
among the reporting countries. Ifo’s surveys suggest that activity has
lost steam since the rebound in 2Q. But expectations at the six-month
horizon recovered somewhat in October from the steep slide since spring.
Analysts polled by ZEW this month were also more optimistic on balance
about prospects for next spring, though over half expected little
change.

In France, activity dipped 0.3% on the month and was 1.3% was lower
on the year. While housing permits are recovering slowly, housing starts
continued to decline through September.

French housing developers surveyed by Insee last month suggested
that the upswing in permits would continue. Home builders reported a
modest slowdown in recent activity, but their outlook for the near term
brightened significantly. Commercial builders’ assessment of recent
activity was little changed, but their outlook for the months ahead also
continued to recover. Insee expects household investment in housing to
recover in the second half — enough to offset the ongoing contraction
in commercial construction by the end of the year.

As usual, monthly data were not released for Italy, where sector
activity recovered 2.5% in 2Q but was still 3.5% lower on the year.
Sector sentiment has improved little this year since the slide from
early 2007, Isae’s surveys show. Builders’ assessment of activity eroded
in September as did their outlook for construction projects in the near
term.

Elsewhere, activity in the Netherlands declined 0.6% on the month
and was 10.1% below the previous-year level. Portugal posted a 4.6%
monthly drop, giving a 10.2% decline on the year. Activity in Slovenia
plunged 8.3% on the month and was 18.5% lower on the year. Slovakia
sustained 7.6% monthly fall, for an annual decline of 4.0%.

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

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