June: -1.8% m/m, -11.3% y/y
May: +0.1% m/m (revised from -1.1%)
April: +1.1% m/m (revised from +1.2%)
March: -0.3% m/m (revised from -0.2%)
February: -0.5% m/m (revised from -0.6%)
January: +4.0% m/m (unrevised)
—

PARIS (MNI) – Construction activity in the Eurozone contracted
sharply in June, more than retracing the recovery since March, Eurostat
said Thursday.

The 1.8% monthly downturn left activity 11.3% lower on the year and
more than 20% below levels seen before the slide over the past three
years. Indeed, activity has recovered only 2.4% since the cyclical low
in December. The 1.4% rebound in 1Q slowed to a 0.2% gain in 2Q.

Building activity alone fell back 1.0% in June, giving a 12.5%
decline on the year. Civil engineering dropped 2.7% after a 1.1%
downturn in May to stand 4.5% lower on the year.

The latest seasonally adjusted monthly estimates are based on data
from only six of the Eurozone’s 17 member states.

While activity has been gradually recovering in Germany and a few
smaller northern economies, the Eurozone sector as a whole is likely to
remain anemic due to persistent weakness in Italy and the ongoing slump
in Spain and most peripheral countries.

Eurozone builders polled by the European Commission in July said
recent activity had weakened, as did their assessment of order books.
Despite some recovery over the past two years, sector sentiment remained
well below average everywhere except for Germany, France, Austria,
Finland, Luxembourg and Estonia and at or near record lows in Spain and
Greece.

The August survey of the magazine Construction Europe also flagged
a contraction in recent activity, pulling its sentiment barometer down
to an 18-month low. Given the sharp downturn this summer, the editor
suspected a “fundamental weakening” might be accentuating the usual
seasonal slowdown.

In Germany, activity fell back 4.5% in June to a six-month low, but
was still 2.6% higher on the year. After a 34.5% rebound in 1Q, growth
in 2Q slowed to 4.9%. New orders in April and May were up 1.2% from the
1Q average and permits were 0.7% higher, according to separate Eurostat
data.

Germany’s economic upswing is supportive for investment in
commercial construction, while home building has emerged from years of
stagnation. New residential orders and permits have rebounded over the
past two years as prices recovered. The sector drop in June was not
reflected in the Ifo institute’s surveys, which show builders ever more
euphoric about current activity and somewhat more confident at the
six-month horizon. Ifo’s sentiment indices declined in all other key
sectors in July.

In France, activity slipped another 0.1% after a 0.8% downturn in
May and was 0.1% lower on the year. Prospects here are less favorable
than in Germany, as the recovery in building starts and permits has
flagged in recent months. The main risk for the housing market is the
return of a price spiral, especially in urban centers where supply is
limited by zoning restrictions.

Whereas morale in most sectors of the French economy deteriorated
in July, Insee’s index for construction sentiment stabilized. Builders
had some doubts about overall sector prospects, but for their own
activity they reported a pick-up and were increasing optimistic about
near-term trends.

Eurostat no longer publishes adjusted monthly data from Spain “due
to the volatility of their current working day adjusted data series.”
The annual comparison for June showed a whopping 43.7% drop.

Despite the collapse in Spanish housing starts since the real
estate bubble, more than half a million homes are looking for buyers in
a country where there are more lodgings than households and 82% of the
population are already home owners.

As usual, no results for Italy were available for the reporting
month. Activity had dropped 1.2% in May, giving a 0.2% gain on the year.
Sector sentiment eroded in June, reflecting weaker orders, according to
Istat. The Commission’s survey showed a further deterioration in July.

Elsewhere, construction in the Netherlands edged up 0.2% in June to
stand 2.3% higher on the year. Activity in Portugal recovered 1.7% on
the month, but was still down 2.1% on the year. Slovakia posted a 2.0%
monthly rise and a 1.0% annual decline. Activity in Slovenia was down
11.9% on the month and 35.9% lower on the year.

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

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