Construction sector output falls 10% in year, with worse to come

After a decade of expansion that seemed to turn the Spanish coast into a big building site, the construction sector is finally starting to shrink in response to a frozen property market.

The latest figures from Eurostat – the EU’s statistics office – show that Spain’s construction sector output fell 10.1% in the year to March, by far the biggest fall in the EU. Construction activity fell by an average of 1.4% in the Eurozone, and by 0.1% in the EU as a whole.

Based on the figures available Spain is at the bottom of the table for annual construction sector growth, followed by Portugal with -6.5%. Figures for Ireland are not yet available, but given that Irish construction sector output fell by 14% in the last quarter of 2007, it may yet challenge Spain for last position.

But whilst building sites start to fall silent in Spain, the same cannot be said for all EU member countries. Over the same period building activity rose substantially in Rumania (+32.5%), Sweden (+23.2%) and Slovenia (+22.2%).

On a monthly basis, however, the decline in Spain is less dramatic. Between February and March, Spanish construction output only fell by 1.7%, compared to falls of 12.3% in Germany, 12.2% in Slovenia, and 9% in the UK.

Activity in the property market leads the construction sector by 6 months or more. As Spain’s property market freezes up, it is only a matter of time before it translates into further significant falls in construction output.

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