Seasonally adjusted data:

May: +0.1% m/m, -8.4% y/y
April: -3.7% m/m (revised from -2.7%)
March: +11.0% m/m (revised from +11.4%)
February: -9.7% m/m (revised from -9.8%)
January: -0.8% m/m (revised from -0.7%))
—

PARIS (MNI) – Eurozone construction recovered marginally in May, as
a rebound in Germany barely offset further declines in most other large
economies, Eurostat estimated Wednesday.

The 0.1% monthly downturn still left activity 8.4% lower on the
year and some 22% below levels seen in 2007. April-May results were 0.2%
below the 1Q average, which had dropped 4.2% on the quarter.

Building activity alone, which fell 4.1% in 1Q, was down 0.2% in
May and 8.6% lower on the year. Civil engineering edged up 0.6% on the
month after drops of 3.9% in April and 4.2% in 1Q to stand 9.3% lower on
the year.

Construction has not yet reached a floor. Indeed, activity has
never really recovered from the crash in 2008 and is being dragged down
further as the economy slumps. Building firms remain pessimistic on the
whole, the European Commission’s surveys show.

However, the overall picture masks great core-periphery
divergences, and spotty data on permits and orders suggest these trends
will continue.

“Looking ahead, activity in the construction industry is likely to
remain subdued,” the ECB said in its latest Monthly Bulletin.

The Commission expects Eurozone housing investment to contract
further this year and return to “moderate” growth next year, with
household outlays offsetting a further decline in public investment.

In Germany, activity bounced back 3.1% in May from a 5.5% downturn
in April and was 2.2% higher on the year – the sole annual gain among
reporting countries. Rising prices, favorable financing, demand for
housing and promising investment returns all argue for further growth.

While German construction firms polled by the Ifo institute are no
longer quite so optimistic about near-term prospects, the Bundesbank
expects further expansion on the back of recent building permit trends.
The construction association HDB sees home sales rising 7% this year and
commercial sales up 5%, more than offsetting a 1% contraction in public
works.

At the other end of the spectrum, Spanish construction, in decline
since last autumn, fell another 3.3% in May and is 24.8% lower on the
year. The bloated housing market will remain a drag on activity for the
foreseeable future. Builders polled by the Commission in June reported
little improvement in order books but were less pessimistic about recent
activity than in May.

With Spanish credit conditions tightening, housing demand remains
sluggish despite falling prices. Banks are likely to aggravate the
situation as they unload real estate assets. After an 11% drop in prices
last year, the Commission expects a further decline in the short term,
“paving the way for further adjustment of the housing sector and
possibly a slight reduction in the large stock of unsold houses.”

Italian construction, which has been on a downward trend for over a
year, fell 1.4% on the month to stand 14.8% lower on the year. Sector
sentiment has sunk to the lowest level in nearly three years, reflecting
declining orders and eroding production prospects, Istat’s surveys show.

Despite the stimulus measures announced last month, near-term
prospects for Italy’s construction sector are “not favorable,” the Bank
of Italy said Tuesday, projecting a 7% drop in construction investment
this year and further dampening effects next year from high financing
costs, weak demand and stagnant housing prices.

In France, activity recovered by 0.4% in May after a 0.8% downturn
in April and was 1.4% lower on the year. But builders polled by Insee
last month said recent activity had lost steam and were more downbeat
about order books. Housing permits are declining and recent housing
starts are nearly 19% lower on the year. Commercial starts are down over
20%. Insee expects a technical recovery in sector activity in 2Q and
stagnation in the second half.

In the Netherlands, activity was down 0.7% on the month and 11.8%
lower on the year. The slide in housing prices over the past two years
has accelerated in recent months, giving a 5.5% annual drop in May.
Turnover on the housing market in the first five months of the year was
12% below the previous-year level despite an upturn in May, according to
national data.

Only three other Eurozone countries reported construction results
for May. Activity was up 3.6% in Portugal, up 3.4% in Slovakia and down
17.5% in Slovenia. Annual declines ranged from 8.5% for Slovakia to
23.7% for Slovenia.

Most recent results for Greece showed 1Q activity 9.1% lower on the
year. In Ireland, the annual decline in 1Q was 11.7%.

–Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com

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