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EUROFER Construction Industry Forecast 2020-21

Steel News - Published on Tue, 11 Aug 2020

Image Source: EU Construction COVID19
Prospects for the EU construction sector are hugely impacted by the economic lockdown which European countries experienced from mid-March to early June, with variations in intensity and with some local lockdowns still in place. This has resulted in closures of construction sites, particularly in civil engineering. However, some EU countries have explicitly planned to restart public construction activity as quickly as possible, so as to use it as a countercyclical tool during the unprecedented economic downturn. The EU construction confidence indicator had remained well above its long-term average over the first half of 2019 but has continued to decline since then.

This trend has continued in early 2020 according to available figures, before plummeting to record lows in April. It is worth recalling that construction activity at the end of 2019 was already experiencing a slowdown that is not only due to demand-related factors such as the weakening economic fundamentals and a general cooling of market dynamics after several years of strong growth.

Albeit largely affected by the huge disruption caused by the COVID-19 lockdown, the construction industry is expected to perform relatively better-that is, to experience a lower recession - than the other steel-using sectors with regards to the expected trend in production activity.

The residential construction market and, particularly, private non-residential subsectors are expected to be impacted the most by the halt in construction production in the course of 2020. Despite mortgage and business loans set to remain at record lows, the fall in incomes due to the increase in unemployment as a result of the economic lockdown will be strongly unsupportive of housing demand. |Until a substantial improvement in the labour market, and growth in wages is seen the residential market will not provide positive contribution to new output in construction.

Non-residential construction (offices, commercial and industrial buildings), which was already the weakest subsector in 2019 due to subdued investment climate and economic uncertainty, is expected to pay the highest toll to the pandemic-related lockdown. Even after the removal of lockdown measures, the probable continued downturn in the manufacturing industry in the EU will most likely result in delayed investment decisions, with very little benefit for new non-residential investment.

In contrast, the role of civil engineering as a growth engine for the construction sector is expected to strengthen over the forecast period, and to avoid a deeper collapse of the sector as a result of the COVID-19 outbreak. During the economic slowdown in 2019, civil engineering consistently recorded higher growth rates than both residential and non-residential construction.
Under the current, dire economic circumstances, many EU governments have announced that they will provide impetus to the completion of public construction and infrastructure projects, facilitated by to the suspension of the Stability and Growth Pact and the Fiscal Compact. Lower government debt service costs, given the continuity of the ECB action, should provide a very supportive role.

Construction output will drop by -5.3% in 2020, and will rebound by +4% in 2021.

Source :

Posted By : Yogender Pancholi on Tue, 11 Aug 2020
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