EU construction growth to slow in 2020

EU construction output growth is forecast to slow to 0.8% on-year each in 2020 and 2021, after expected growth of 3.8% in 2019, according to European steelmakers’ association Eurofer.

The expected slowdown in 2020 is mainly due to demand-related factors such as weakening economic fundamentals and a general cooling of market dynamics after several years of strong growth. The construction industry will nevertheless continue to outperform other steel-using sectors, Eurofer observes.

In some countries, improving real wages and cheap mortgage financing will continue to stimulate demand for residential housing. In other EU countries demand is expected to weaken considerably in 2020 as the residential construction cycle has already peaked in 2017. The persisting labour shortage in the construction sector in many EU countries is putting a brake on the completion of construction projects.

The current downturn in the manufacturing industry in Europe is expected to soften during 2020 but will most likely continue to somewhat delay non-residential investment decisions.

“By contrast, civil engineering is expected to continue to play a key-role in construction sector growth over the forecast period, as it will continue to record higher growth rates than both residential and non-residential construction,” Eurofer says in a report seen by Kallanish.

“Improving investment in infrastructure projects – thanks to more room for public investment due to better budgetary conditions in many Member States, as well as lower public debt servicing and higher efficiency in project implementation are expected to be supportive of public construction spending,” the association continues.

EU construction sector output grew 3.4% on-year in the third quarter of 2019 versus 4.6% and 6.4% in Q1 and Q2 respectively. Growth was particularly pronounced in Hungary, the Netherlands, Poland and Spain.

Gross fixed investment in construction grew in real terms in Q3 by 3.7% on-year and 0.5% on-quarter.