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Euro area construction activity rises in July, GDP growth likely to stay close to potential for some time

Euro area construction activity continued to keep its uptrend in July after recovering in the second quarter from weather-related softness recorded in the first quarter. Construction sector output rose for the fourth straight month. Output was up 0.3 percent sequentially, as compared with the revised gain of 0.7 percent seen in the prior month. Growth was drive by building work that rose 1.9 percent sequentially, while civil engineering work dropped.

 

On a year-on-year basis, construction output rose 2.6 percent year-on-year and 1.7 percent three-month-on-three-month. However, country wise growth in construction sector was driven by Germany that recorded a sequential growth of 2.6 percent and a year-on-year growth of 4 percent. Nevertheless, growth dropped in France and Italy after solid readings recorded in the second quarter.

 

Germany is likely to see some payback in September, while shifts in the weather might inject some volatility into the winter, stated Daiwa Capital Market Research in a report. Nevertheless, all indicators point towards an ongoing optimistic trend in the sector. Sentiment in construction sector recovered in August to a historically high level, while new orders indicators continue to be elevated too.

 

“And with property prices rising steadily in most member states (up 4.5 percent Y/Y in the euro area in Q1), GDP growth likely to remain close to potential for a while yet, and bank lending rising amid historically low interest rates, demand should remain firm too”, added Daiwa Capital Market Research.

At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -17.581, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -10.6381. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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