After several months of dynamic growth, construction output in August slowed somewhat, and growth in the final quarter of the year is likely to be in single figures. This scenario is confirmed by a pronounced downturn in the indicator of the economic climate in construction, which PMR monitors on a six-monthly basis – it now stands at -2.4 pts, which represents a return to its level in spring 2009.
In August the value of construction and assembly output in Poland was almost PLN 8.7bn, which represented growth of 10.8% on August 2010; this was a far lower increment than in previous months. As a result, real growth of construction output for the first eight months of the year weighed in at 18.5%. As in previous months, the growth in August was chiefly driven by dynamic growth in output among construction companies specialising in civil engineering (of 15.2%) and specialist work (22.8%), while companies erecting buildings saw growth of just 1.5%. The slower growth in August, then, is above all the effect of the lower growth figures recorded in civil engineering, which in turn is due to the effect of a higher comparative base. We expect the coming months to see construction output growth at a level of around 10%, though in the last quarter of the year we do not rule out single-figure increments.
In August the rate of change in employment levels stabilised and pay growth improved in construction companies. The marked growth in prices of construction output continued, however, moving from 1.1% in July to 1.4% in August. Growth in employment and pay levels is still driven by engineering and specialist companies.
The first signs of slowing growth in the construction sector that we reported a month ago have been reflected in the latest results of a study conducted among high-level management employees and the operations divisions of the 200 largest Polish construction companies for a report entitled Construction sector in Poland, H2 2011. Comparative regional analysis and development forecasts for 2011-2014.
This, our fifteenth study, saw a significant deterioration in moods in the construction sector in Poland. The PMR Construction Climate Index in September 2011 assumed a value of -2.4 pts, showing that after two years of relative stability construction firms are now far less optimistic in their assessments of the current and future situation on the market. We judge that this less positive assessment of the situation in the sector is partly due to factors such as the constant uncertainty on the financial markets, the imminent completion of the construction phase of most Euro 2012 investments, the need for investment cuts in the public sector (in particular in road-related investments), and the lack of any significant revival in private-sector investments, especially in the developer segment.
Head Construction Market Analyst