Construction volumes in the EU will decrease by 1.4% y/y in 2024 – EUROFER

The European steel association EUROFER expects a 1.4% decline in construction in the European Union in 2024 compared to 2023. The previous forecast was for a 1% decline. This is stated in the association’s review “Economic and steel market outlook 2024-2025, Q3”.

In 2025, construction activity is expected to recover by 1.8% y/y compared to previous forecasts of +2.7% y/y.

In the first quarter of 2024, construction volumes in the block decreased by 2.3% y/y for the seventh consecutive quarter.

“Rising prices for construction materials, coupled with labor shortages in some EU countries, rising economic uncertainty and, in particular, rising interest rates due to tightening monetary policy, have negatively affected construction volumes in the bloc for the seventh consecutive quarter,” EUROFER said.

This trend is expected to continue throughout 2024, mainly due to the delayed impact of high interest rates, which will remain at the same level despite the ECB’s initial rate cuts and possible further monetary easing during the year, as well as further interest rate increases.

Consistent with real output, the recession in the sector was also confirmed by the latest quarterly data on construction investments, which declined by 1.2% y/y in the first quarter. Investments in residential construction dropped by 1.8% y/y, mainly due to rising mortgage interest rates. At the same time, civil construction proved to be resilient to the overall industry downturn, but was unable to compensate for the decline in residential investment.

In 2024, a significant reduction in government support for the construction industry, which was the driver of growth in 2020-2022, is expected due to a shortage of building materials, rising prices, and a reduction in fiscal space for project financing. According to the association’s forecasts, civil construction will continue to make the main contribution to the industry as a whole.

As GMK Center reported earlier, production in the construction sector of the European Union in May 2024 fell by 1% compared to the previous month. Compared to May 2023, the seasonally adjusted figure decreased by 2.5%.

The average annual production in EU construction in 2023 increased by 0.1% compared to 2022.