9th November, 2011
72nd EUROCONSTRUCT Conference in Paris, France
European Construction Market: Further decline in 2012
EUROCONSTRUCT forecasts were revised downwards in course of the current debt crises.
Recovery delayed by a year
The sovereign debt crises prompted most Euroconstruct members to revise their forecasts downwards after the Helsinki conference (June 2011). One of the main reasons was the less favourable macroeconomic framework: whereas economic growth of 1.9% (GDP by volume) had been anticipated in June for the Euroconstruct zone in 2012 and 2013, it is now projected at no more than 1.1% in 2012 and 1.7% in 2013.
The economic growth outlook for 2012 has clearly worsened, due to the dramatic tightening of budgetary policies and the plunge in confidence. European economic activity should nevertheless benefit in the short term from strong and sustained growth in the emerging economies, as well as low interest rates (at least in some countries). In the medium term (from 2013), growth is expected to accelerate in most countries when the imbalances have been corrected.
There will, however, be substantial divergence in the growth rates of individual European countries due to the variation in their specific circumstances. The Euroconstruct area comprises the following four zones:
Peripheral countries 'in difficulty' (notably Ireland and Portugal): these countries are suffering from high debt levels, obliging them to implement drastic economic and fiscal policies. Portugal is experiencing true recession and will for some time, with GDP contraction of around 1.2% on average in the period 2011-2013, according to our country experts.
A 'rainbow' zone, including Spain and Italy: in these two countries, budgetary austerity and high unemployment will continue to inhibit activity. Their respective growth rates are expected to return to around 0.3% and 1% on average by 2013, before rebounding in 2014.
The heart of Europe and the Nordic countries, which do not constitute a homogenous block (some are more vulnerable than others), but whose growth rates will only pause in 2012 before stepping up again from 2013.
The central European countries, such as the Czech Republic, Hungary, Poland and Slovakia: their growth rate is likely to slow in 2012 due to stalling growth in the European countries, their main trading partners. From 2013 onwards, their GDP growth is expected to rebound, settling at a range of 2-3.9%, on the back of domestic demand sustained by a robust credit market and a recovery in external trade.
A direct consequence of this revision of macroeconomic forecasts is reduced construction output forecasts. The 2011 estimate is almost unchanged (at -0.6% by volume, from -0.4%), mainly due to a good first quarter that will offset the decline expected in many countries towards the end of the year, in response to the events of the summer. But these events will hit construction hardest in 2012: the forecast has moved slightly into negative territory in the new market trend scenario (-0.3% from +1.3%). Construction output in the Euroconstruct zone will thus reach its lowest point in 2012, since the 2013 forecast has been cut by only half a point and remains positive (+1.8%).
The biggest downward revisions primarily concern civil engineering, followed by non-residential (public) buildings: these two segments are particularly vulnerable to the budgetary austerity plans put in place by the countries most exposed to the debt crisis.
Construction will not return to the level of the early 2000s until 2014 In 2012, the European construction market will therefore continue to register negative growth in an unfavourable macroeconomic climate (GDP growth of less than 2% by volume), a situation similar to that of 2011. In 2013 and 2014, however, construction growth will outstrip GDP growth, although the gap will be very narrow. Such a situation would allow for a return to the usual pattern of the construction cycle, i.e.:
more pronounced broadening than the macroeconomic cycle (GDP) due to the close link between construction and investment (Gross Fixed Capital Formation)
a lag behind the macroeconomic cycle particularly marked in the current period.
Growth in construction in 2013 and 2014 will not be nearly enough for a return to the levels seen just before the crisis, since cumulative growth of about 4% by volume between 2012 and 2014 will be very small by comparison with the cumulative decline of around 17% between 2008 and 2012. At end- 2014, total output is expected to just reach the level of the early 2000s (at 2010 prices).
Relative stability of renovation and maintenance limits the negative impact of new building
This is especially true for new building output, which has declined very sharply, for non-residential construction since 2007 and for residential construction since 2008, reflecting a drop in solvent demand and excess vacant stocks, resulting from late adjustment of supply to demand.
Civil engineering declined to a lesser extent during the crisis, due to greater support from the public sector (stimulus plans) and the absence of speculative phenomena on this market.
By contrast, the building renovation and maintenance market has had a very pronounced regulating effect on the overall construction market, with a cumulative decrease of only about 10% during the crisis, and is expected to return to its record level of 2008-2009 from 2014.
EUROCONSTRUCT Paris 2011, special topic
The afternoon session of the Paris Euroconstruct Conference, led by BIPE, has looked at Energy Efficiency Improvement in existing buildings in Europe. As a key market for helping the European Union meet its targets in terms of energy independence and reducing greenhouse gas emissions, it represents an excellent opportunity for all firms involved in the building industry. Four key figures have discussed their analyses of its diversity and the conditions which need to be met in order for it to develop: Philippe Pelletier (Grenelle Building Plan), Frank Heidrich (Building Energy Climate Plan - Germany), Roger Maquaire (Saint-Gobain) and Bruno Marotte (Bouygues Bâtiment).
If you have any specific questions regarding the Paris conference please contact
Mr. Michel Vivinis
Organisator of the 72nd EUROCONSTRUCT Conference
E-mail: France@euroconstruct.org
Phone: + 33 (0)1 70 37 23 23
The results of the recent EUROCONSTRUCT Conference are available now!
Get in touch with your local EUROCONSTRUCT member to order the latest "EC Country or Summary Report"
Find your local partner institute here
http://www.euroconstruct.org/pressinfo/pressinfo.php
72nd EUROCONSTRUCT Conference in Paris, France
European Construction Market: Further decline in 2012
EUROCONSTRUCT forecasts were revised downwards in course of the current debt crises.
Recovery delayed by a year
The sovereign debt crises prompted most Euroconstruct members to revise their forecasts downwards after the Helsinki conference (June 2011). One of the main reasons was the less favourable macroeconomic framework: whereas economic growth of 1.9% (GDP by volume) had been anticipated in June for the Euroconstruct zone in 2012 and 2013, it is now projected at no more than 1.1% in 2012 and 1.7% in 2013.
The economic growth outlook for 2012 has clearly worsened, due to the dramatic tightening of budgetary policies and the plunge in confidence. European economic activity should nevertheless benefit in the short term from strong and sustained growth in the emerging economies, as well as low interest rates (at least in some countries). In the medium term (from 2013), growth is expected to accelerate in most countries when the imbalances have been corrected.
There will, however, be substantial divergence in the growth rates of individual European countries due to the variation in their specific circumstances. The Euroconstruct area comprises the following four zones:
Peripheral countries 'in difficulty' (notably Ireland and Portugal): these countries are suffering from high debt levels, obliging them to implement drastic economic and fiscal policies. Portugal is experiencing true recession and will for some time, with GDP contraction of around 1.2% on average in the period 2011-2013, according to our country experts.
A 'rainbow' zone, including Spain and Italy: in these two countries, budgetary austerity and high unemployment will continue to inhibit activity. Their respective growth rates are expected to return to around 0.3% and 1% on average by 2013, before rebounding in 2014.
The heart of Europe and the Nordic countries, which do not constitute a homogenous block (some are more vulnerable than others), but whose growth rates will only pause in 2012 before stepping up again from 2013.
The central European countries, such as the Czech Republic, Hungary, Poland and Slovakia: their growth rate is likely to slow in 2012 due to stalling growth in the European countries, their main trading partners. From 2013 onwards, their GDP growth is expected to rebound, settling at a range of 2-3.9%, on the back of domestic demand sustained by a robust credit market and a recovery in external trade.
A direct consequence of this revision of macroeconomic forecasts is reduced construction output forecasts. The 2011 estimate is almost unchanged (at -0.6% by volume, from -0.4%), mainly due to a good first quarter that will offset the decline expected in many countries towards the end of the year, in response to the events of the summer. But these events will hit construction hardest in 2012: the forecast has moved slightly into negative territory in the new market trend scenario (-0.3% from +1.3%). Construction output in the Euroconstruct zone will thus reach its lowest point in 2012, since the 2013 forecast has been cut by only half a point and remains positive (+1.8%).
The biggest downward revisions primarily concern civil engineering, followed by non-residential (public) buildings: these two segments are particularly vulnerable to the budgetary austerity plans put in place by the countries most exposed to the debt crisis.
Construction will not return to the level of the early 2000s until 2014 In 2012, the European construction market will therefore continue to register negative growth in an unfavourable macroeconomic climate (GDP growth of less than 2% by volume), a situation similar to that of 2011. In 2013 and 2014, however, construction growth will outstrip GDP growth, although the gap will be very narrow. Such a situation would allow for a return to the usual pattern of the construction cycle, i.e.:
more pronounced broadening than the macroeconomic cycle (GDP) due to the close link between construction and investment (Gross Fixed Capital Formation)
a lag behind the macroeconomic cycle particularly marked in the current period.
Growth in construction in 2013 and 2014 will not be nearly enough for a return to the levels seen just before the crisis, since cumulative growth of about 4% by volume between 2012 and 2014 will be very small by comparison with the cumulative decline of around 17% between 2008 and 2012. At end- 2014, total output is expected to just reach the level of the early 2000s (at 2010 prices).
Relative stability of renovation and maintenance limits the negative impact of new building
This is especially true for new building output, which has declined very sharply, for non-residential construction since 2007 and for residential construction since 2008, reflecting a drop in solvent demand and excess vacant stocks, resulting from late adjustment of supply to demand.
Civil engineering declined to a lesser extent during the crisis, due to greater support from the public sector (stimulus plans) and the absence of speculative phenomena on this market.
By contrast, the building renovation and maintenance market has had a very pronounced regulating effect on the overall construction market, with a cumulative decrease of only about 10% during the crisis, and is expected to return to its record level of 2008-2009 from 2014.
EUROCONSTRUCT Paris 2011, special topic
The afternoon session of the Paris Euroconstruct Conference, led by BIPE, has looked at Energy Efficiency Improvement in existing buildings in Europe. As a key market for helping the European Union meet its targets in terms of energy independence and reducing greenhouse gas emissions, it represents an excellent opportunity for all firms involved in the building industry. Four key figures have discussed their analyses of its diversity and the conditions which need to be met in order for it to develop: Philippe Pelletier (Grenelle Building Plan), Frank Heidrich (Building Energy Climate Plan - Germany), Roger Maquaire (Saint-Gobain) and Bruno Marotte (Bouygues Bâtiment).
If you have any specific questions regarding the Paris conference please contact
Mr. Michel Vivinis
Organisator of the 72nd EUROCONSTRUCT Conference
E-mail: France@euroconstruct.org
Phone: + 33 (0)1 70 37 23 23
The results of the recent EUROCONSTRUCT Conference are available now!
Get in touch with your local EUROCONSTRUCT member to order the latest "EC Country or Summary Report"
Find your local partner institute here
http://www.euroconstruct.org/pressinfo/pressinfo.php
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