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Construction output up over 35% in H1 2019

Output of Hungaryʼs construction sector climbed 20.3% year-on-year in June, show data released Monday by the Central Statistical Office (KSH). In a month-on-month comparison, output rose 1.7% from May, adjusted for seasonal and working day effects.

Output of the buildings segment was up 23.5% in June, lifted by construction of industrial buildings and warehouses, the KSH said. Civil engineering output increased 16.5%, supported by road, utility and railway projects, it added.

For the period January-June 2019, construction sector output was up 35.1% year-on-year compared to the first half of 2018.

In absolute terms, output stood at HUF 409.7 billion in June alone, and totaled HUF 1.832 trillion in the first half of 2019.

The order stock in the sector was down 11.2% at the end of June compared to 12 months earlier. The stock rose 31.7% in the buildings segment, but was down 21.2% in the civil engineering segment.

The new order volume was up 0.9% as new orders for buildings rose 27.4%, while civil engineering orders fell 12.6%.

Producer prices up 10% in Q2

In the second quarter of 2019, construction producer prices increased by 10.2% compared to the corresponding period of the previous year.

In the second quarter, within the divisions of construction, prices increased by 11.8% in the construction of buildings, by 8.7% in civil engineering, and by 10.0% in specialized construction activities (carrying the greatest weight) compared to the second quarter of the previous year.

Construction prices were 2.2% higher than in the preceding quarter.

Construction data for July 2019 will be published on September 13.

Slowdown expected in H2

Commenting on the data, László Koji, head of the National Federation of Hungarian Building Contractors (ÉVOSZ), was cited by state news wire MTI as saying that he expects output growth in the sector to slow down in the second half of the year, partly due to the high base. Civil engineering performance in particular is expected to show a decline as EU monies available for infrastructure developments in the 2014-2020 period were already placed out in 2017-2018 by the government, he added.

Analyst András Horváth of Takarékbank also noted the slowdown in construction output growth, which followed very strong growth data at the beginning of the year. He said the question is the extent to which the slowdown can be attributed to temporary factors such as labor shortages and the phasing out of the preferential VAT rate on home construction.