Hungary construction sector with no sign of improvement

Orders figures in the Hungarian construction industry are greatly disappointing, with no signs of a revival in the sector any time soon. Still, the 0.1% month-on-month contraction is an improvement compared to the 4.3% decline in December.

While the first month of 2011 did not bring about a turnaround in Hungary’s construction industry, the slight fall in orders can be considered an achievement compared to the production drop detected in the autumn months of 2010.

Demand for the construction sector’s produce is being reduced by the shortage of loans, a drop in households’ income and the cut in public spending. The declining trend which has been lasting for years is likely to switch to stagnation during the year, but there are no signs of growth visible, yet.

Hungary’s construction sector output dropped by 4.2% year on year in January 2011, according to both unadjusted figures and data adjusted for working days. According to seasonally adjusted indices, the production in January was 0.1% lower than in the previous month.

When analyzing the data, it should be taken into account that the average production of the section of construction in January is around 60% of the output of an average month. In January, the output of both main groups of constructions went down. In terms of volume, the construction of buildings and that of civil engineering works decreased by 4.2% and 4.5% yr/yr, respectively, which compares with a contraction of 4.7% and 21.3% in the preceding month.

In January, out of the divisions of construction, the output of the division of construction of buildings - which contains the organisation of building projects and the construction of structures of buildings was 3.8% higher than the very low base of January 2010, This comes after a 14.6% decrease in Dec10. A decline of 2.4% in production was seen in the division of civil engineering works (vs. -33.9% in Dec10), while that of the division of specialised construction works - consisting mainly of building installation and building completion works - showed a decrease of 9.2% (vs. +2.0% in Dec10).

In January, the volume of new orders was 46.6% lower than in January 2010. This has been the biggest yr/yr decline since March 2007. Within this, new contracts for building construction decreased by 9.3% (vs. -9.6% in Dec10). New orders for civil engineering works fell by nearly 70%. This significant fall is partly caused by the high base deriving from great value contracts signed one year ago for road and highway constructions.

The stock of orders in construction enterprises at the end of January decreased by 21.7% yr/yr, further down from -13.3% in Dec10. Within this, the stock of orders for buildings decreased by 16.8% (-26.6% in Dec) and that for civil engineering works went down by 25.4% (vs. -1.9% in Dec).