Construction works decreased by 15.3% y/y wda in April, steeper than the 3.4% (revised from 6.1%) y/y fall in the previous month, according to preliminary data published by the state statistical institute today (all prints in adjusted terms). The stronger fall was triggered by performance deterioration in all major segments and construction works objects. Hence, the robust growth of the residential construction works softened in April, the non-residential construction turned to the negative territory in the month, despite the relatively low base, while the civil engineering works kept on falling with a steeper pace in April. The latter two major construction sector segments have an important public spending component, so their deterioration is not surprising when looking at the public investment developments in the past months. In the breakdown by structural elements, a worse performance was reported again in current repairs, but the capital repair works decreased notably also. Those construction sector elements are also heavily reliant on public spending.
Broadly, the construction sector remained in the contraction area for about seven months until April this year. The main negative influence comes from the public investments cut, which hampers the sector’s performance by depriving it from public spending in construction infrastructure such as repairs or civil engineering works and in new residential and non-residential buildings. The only positive contribution to the overall sector’s dynamics remained the new residential works, which remained on a solid upward trend. The increased private investors interest in building new residential construction is grounded on a major real-estate improvement reported last year. The strong demand for houses, fuelled by the moderate lending recovery, by the improved population revenues and by the governmental First Home programme pushed up the real-estate sector to post-crisis maximums last year, boosting the interest in new residential construction investments. The same developments might continue in the following period, as only the private financing comes with positive contribution to the construction dynamics. Meanwhile, the state remains focused on consumption-fuelling expansionary policies and on keeping the deficit under control in the context of expenditures’ boost to sustain wage and social benefit hikes. Thus, the public investments would likely remain on weakening trend.