Eurozone construction output falls sharply in February

Construction output fell sharply across the Eurozone in February, official data published on Monday showed.

According to Eurostat, the European Union’s statistics office, seasonally-adjusted production in the construction sector decreased at a month-on-month pace of 2.1% in the Eurozone, or by 1.6% across the wider bloc. That compares to a 0.8% fall in the Eurozone in January, and a 1.0% decline across the EU.

Year-on-year, output slumped 5.8% in the Eurozone, revised down from an initial estimate for a 2.6% decline, and by 5.4% in the EU.

Month-on-month, the heaviest fall was in civil engineering, down 3.4% in the Eurozone, followed by building construction, off 1.9%.

Among individual countries, France reported one of the biggest declines, down 6.0%, while Hungary saw the steepest contraction, off 11.7%. Germany, the bloc’s biggest economy, reported a 1.3% decline, while production fell 3.8% in Spain.

Claus Vistesen, chief Eurozone economist at Pantheon Macroeconomics, said the construction sector had been hit by “weakness across the board”.

But he added: “Looking ahead, we suspect construction output in the Eurozone rose by 1.2% in March, though that won’t be enough to salvage the first quarter as a whole. We now think that output fell slightly in the first quarter, by 0% to 0.5%, after a 1% increase in the fourth quarter.

“A sharp drop in Germany, where output fell by almost 12% in January and February, was the main drive as activity dropped in the wake of the VAT hike.

“We need to keep a close eye on these data in the next few months, but we are not overly worried. Distortions from the German VAT hike will fade eventually, and as the economy reopens in the second half of the year, activity should get a further boost.”