Construction activity in the EU is anticipated to decrease by 1.3% y/y in 2024
Date:2024-11-06View:88Tags:Butt weld fittings,hot rolled stainless steel coil,"heavy stainless plate"
This forecast comes from the steel producers’ association EUROFER in its Economic and Steel Market Outlook for 2024-2025, Q4.
A recovery is expected in the construction sector in 2025, with a projected growth of 1.3% y/y. Notably, the previous forecast for 2024 was a decline of 1.4% year-on-year, while for 2025, it was an increase of 1.8% year-on-year.
The construction industry has been facing challenges since the third quarter of 2022, attributed to escalating interest rates and economic uncertainties. The European Central Bank's rate hikes during 2022-2023 have notably impacted demand for residential construction, which has exhibited negative trends for nine consecutive quarters. For instance, investments in residential construction in the second quarter of 2024 decreased by 4.1% compared to the previous year.
Despite recent interest rate cuts by the ECB, the positive effects are expected to materialize gradually, with high rates projected to continue to weigh on the sector until the end of 2024. However, there are signs of recovery in certain construction subsegments, notably civil engineering, which saw a 0.8% growth in the second quarter of 2024 following a decline in the preceding quarter.
The outlook for 2024-2025 suggests that EU governments will persist in supporting the sector through infrastructure projects, although overall government backing may diminish due to budget constraints and escalating construction material prices. This scenario could potentially dampen construction confidence in Europe, a trend that began manifesting in September 2024.
Moreover, the private non-residential construction sector remains fragile, with investors exercising caution regarding new office and commercial projects. This sector was particularly vulnerable during the pandemic, facing high vacancy rates. While some recovery has been observed, the sector's overall performance remains subdued.
Reflecting on past trends, the construction sector's growth, which commenced in late 2020 and lasted for eight quarters, halted in the third quarter of 2022. Following peak performance in 2021, fueled by substantial government support, the sector encountered renewed pressures due to economic challenges, rising material expenses, and shortages in labor.
In summary, construction in the EU is expected to continue its recessionary trend in 2024, albeit with a slightly less pronounced rate of decline than previously anticipated.
In August, construction in the EU saw a 0.4% increase compared to the preceding month. However, on a year-on-year basis, the seasonally adjusted figure dropped by 2.4% compared to August 2023. Notable monthly growth rates in construction for August were recorded in Sweden (+7.2% month-on-month), the Netherlands (+6.3% month-on-month), and Romania (+4.7% month-on-month).
The average annual production in EU construction for 2023 showed a marginal increase of 0.1% compared to 2022.
