Romania’s construction works volume index increased by 7.7% y/y in August, the statistics office reported. August data validates the recovery marked by construction firms in July, when the index surged by 15.8% y/y. The activity in the sector has gained ground in Jul-Aug after contracting rather sharply in the first half of the year - by 6.7% y/y in Q2 and by 4.4% y/y in Q1.

The construction activity strengthened in July and remained high later in August – against a seasonal pattern of a slowdown in the construction activity in July-August marked in the previous two years. Seasonally, the activity is expected to further strengthen in the autumn months and remain high in the last months of the year as companies complete the projects of this year’s cycle of activity.

The seasonally- and workday-adjusted index edged down 1% m/m in August – but remained at high level after the sharp 9.5% m/m advance in July. In fact, the seasonally-adjusted index is close to its highest levels in the past three years. The activity in the construction sector, reflected by the seasonally-adjusted index, collapsed during 2009, stagnated in 2010 and gained slightly ground in 2011 – to later ease through 2012. The index was on a downward pattern for some 12 months ending May this year – before gradually strengthening in June-August.

The recent pattern of activity in constructions is consistent with the political cycle – given the political turmoil started in April 2012 with the replacement of the leftist cabinet of Razvan Ungureanu by the leftist coalition USL. USL won last December’s parliamentary elections but the political stabilisation was reflected in the sector’s activity with a delay. The correlation is explained by the volume of public works and by the need of large public investments in infrastructure.