Construction works soften decrease again to 4.8% y/y in Romania

Construction works decreased by 4.8% y/y wda in August, according to preliminary data published by the state statistical institute today (all prints in adjusted terms). The deterioration in the sector moderated from the 6.4% y/y fall in the previous month, revised down from the initial 6.2% y/y print. That was the fourth consecutive month with fall slowing down in the sector, mostly supported by the continued boost from the residential segment. Thus, like in the months after April, only residential construction increased y/y in August, sustained by the positive mood triggered by the very good real estate developments last year. Civil engineering works, which heavily rely on public investments, decreased the strongest again. The segment developments are not surprising, in our view, when looking at the state’s and private investors’ weak interest in spending on infrastructure.

Current repair works decreased by 11.0% y/y in August, which was a steeper fall compared to July. A stronger annual decrease was also reported in the capital repair works, but the new construction segment rose by faster 6.6% y/y in the month, most probably backed by the new residential projects that sustained the residential works strong performance.

Broadly, the sharp drops in civil engineering works was partially cushioned by recovery in the new construction works in residential areas. That was very likely backed by private financing, as the state froze the investments for facing rising personnel costs and higher social spending. However, the authorities have announced that the EU funds absorption resumed after the management authorities dealing with EU funds were accredited in August. Hence, some bigger projects in infrastructure might start or resume this fall, reviving the construction sector, in our view. Thus, the negative trend of the domestic construction works annual dynamics might reverse in the following period. However, the state’s influence in the sector should be significant, as the positive effects from the private investments would very probably fade due to discouraging trend of rates in the real-estate field.

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