Hungarian construction continues free fall but some glimmers of hope

Hungarian construction continues free fall but some glimmers of hope
By bne IntelliNews August 11, 2016

Hungary’s construction output plummeted 16.2% y/y in June, statistics office KSH reported on August 11. The result marked the sixth monthly decrease in a row, due to a sharp decline in projects driven by EU funds, but there are some signs that the free fall could be set to slow.

Despite the ongoing decline in annual terms, output grew 7.5% on a monthly basis, marking the third monthly increase in a row. That, together with an increase in the volume of new contracts, offer some hope for the depressed sector.

Across the first six months of the year, construction output was 25.3% lower. The weakness will not help Hungary's wider economic performance in the second quarter, which is being closely watched following a 0.8% q/q contraction in Q1. Preliminary data is set to be published on August 12.

The construction of buildings increased 14.7% y/y in June. According to KSH, the growth "is largely the result of the construction of industrial and, to a lesser extent, educational buildings and sports facilities”.

Output in civil engineering - by far the largest segment - continued to shrink rapidly, falling 44.5%. That illustrates that recovery of the construction sector remains unlikely until the pipeline of EU-funded projects starts flowing once more. Similarly to recent months, “the largest decrease was recorded in the output of road and railway as well as public utility construction enterprises,”KSH writes.

However, the overall volume of new contracts was 13.3% higher in annual terms in June. Fresh building construction agreements rose 22.6%, but civil engineering deals managed no more than an 8.1% gain. Overall, the order portfolio rose 8.4% in the first six months of the year.

KSH also noted that residential building contracts contributed to the rise in that segment. That suggests the government’s recent measures aimed at supporting home building are starting to pay off.