Construction output increased by 5.6% y/y wda in December, according to preliminary data published by the state statistical institute today (all prints in adjusted terms). That was the first annual growth of the construction works in 2017 and the strongest since May 2016. The improvement was heavily fuelled by a strong jump of the residential works, most probably backed by the announced private projects in the field. In addition, the non-residential and civil engineering works softened the deterioration, as the state improved the EU funds absorption and most probably sustained some public investments in infrastructure.
In the other breakdown, the new construction works was the major driver fuelling the sector’s rise in December. The current repairs dropped by a milder pace y/y in the month. However, despite a slight pick-up sustained by EU funds absorption, the public investments remained weak, keeping the current and capital repair works on the fall.
Generally, the construction sector revived in December, sustained by a pick-up in public investments and by some major projects in new residential properties started by private investors. Nevertheless, the very weak performances in the previous months in 2017 pulled down the construction sector by 5.4% y/y last year, strongly affected by the capital and current repair works, civil engineering and non-residential building projects. Those heavily rely on public money and the government slashed investments for keeping the deficit in line with the pledged target. Looking ahead, we think that the new residential construction would moderate, as demand for houses or other new residential buildings will most probably contract in the following periods due to interest rates hike. The works in non-residential areas might take over with some improvement of the performance in the following periods, because the private investors interest in industrial parks and office buildings remains high. In addition, the expected recovery of the EU funds absorption might further provide a significant financing source for infrastructure, which should sustain better performances of the civil engineering and repair works, especially on the back of a very low base.