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Euro area construction output drops in June, construction sector likely to see growth in quarters ahead

The Euro area construction output data for the month of June was released today. Production in construction was down in the currency bloc. Seasonally adjusted production in construction sector dropped 0.5 percent in euro area, showed Eurostat. On a year-on-year basis, production in construction rose 3.4 percent. Looking at the data, it seems to be disappointing, with production dropping for the second straight month, after falling 0.2 percent sequentially in May. The decline was led by a second straight fall of 1 percent or more in Germany, with French output down too and, by sub-sector, building and civil engineering work both retreating.

But this is not overly concerning and the sector is believed to be in a recovery phase, noted Daiwa Capital Markets Research. The print continues to be strong on a year-on-year basis though.

Over the second quarter as a whole, the construction output rose 1.1 percent, representing the fourth consecutive quarter of growth – the longest unbroken run of growth in the construction sector since 2005 – and implying that construction companies contributed more than their fair share to the euro area’s widespread economic recovery. With the Commission business survey implying that confidence in the sector in July was the highest since 2007, conditions on loans for home purchases continuing to ease, house prices rising, and construction orders well above the long-run average, continued growth in the sector is expected in the quarters ahead, stated Daiwa Capital Markets Research. Germany is expected to lead the growth, where companies are the most upbeat since reunification and the economic fundamentals strongest.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -0.676288, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -59.501. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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