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Construction sector output keeps falling

But growth may continue later this year.

Illustrative stock photo(Source: Sme)

Construction output continued to fall in February. Compared with the previous year, total construction output declined by 10.7 percent to €268.1 million, according to the Statistics Office.

“The base effect which was created by EU funds in 2015 should run out next month,” Boris Fojtík, analyst with Tatra Banka, wrote in a memo. “This would end the year-long fall in construction output that was reflected mostly in the construction of infrastructure as well as non-residential industrial buildings.”

Ľubomír Koršňák, analyst with UniCredit Bank Czech Republic and Slovakia, says that the milder winter in February helped the Slovak construction sector. After seasonal adjustment, the Statistics Office data indicate that construction output rose in February by 2.7 percent month-on-month.

Read also:Industrial output up in December

Monthly production rose in both construction sectors i.e. the construction of buildings and infrastructure.

“Not even the strong monthly growth in output in February, however, helped return construction to the black by annual comparison,” Koršňák wrote in a memo.

In annual terms, the output realised in February 2017 by domestic construction companies decreased by 9.9 percent to €253.6 million. Its share of total construction output increased by 0.9, year-on-year, to 94.6 percent. The development of domestic output was affected by the decrease in new construction, renewals and enhancements by 15 percent and by the increase in repairs and maintenance work by 5 percent.

Non-domestic construction output carried out by construction companies decreased 23.4 percent y/y. Its share represented 5.4 percent out of the total volume of output, according to the Statistics Office.

As for the following months, construction firms expect a mild growth.

“Everything will depend on the ability to realise planned projects,” Fojtík said.

Koršňák claimed that the Slovak construction sector may also benefit from the restart of highway construction that should be financed from EU funds, the state budget, and also via public-private partnership, as well as investments in the private sector.

He also expects that the boom in the residential market will continue, while construction permissions indicate a significant restoration of non-residential building construction.

“The annual drop in construction should significantly moderate in March, but the annual increase in Slovak construction would probably be restored only in the second quarter,” Koršňák wrote in the memo.

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Topic: Economics


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