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Construction up nearly 30% in 2017 against low base

Construction output rose 35.0% in December 2017, albeit compared to a low base a year earlier. Output increased in both main groups of construction: by 28.9% in the construction of buildings, and by 45.3% in civil engineering works, shows a first release of data for the construction sector in December, as well as the full year of 2017.

Based on seasonally and working day-adjusted indices, construction output increased by 3.9% in December compared to the previous month, according to KSH figures.

In December 2017, the increase in the volume of output in the construction of buildings was seen not only in the case of industrial facilities, but in residential as well as cultural and educational buildings, said the KSH. In the case of civil engineering works, output - besides rising from a low base - grew as a result of the construction of highways and railway refurbishment works.

Of the divisions of construction, output increased by 27.2% in the division of construction of buildings, by 53.2% in civil engineering, and by 31.7% in specialized construction activities.

Output in December at current prices stood at HUF 311 bln.

The volume of new orders increased by 124.7% compared to the same period of the previous year, within which new orders grew by 4.0% for the construction of buildings, and by 170.1% for civil engineering works. Among the latter, numerous high-value contracts were concluded for road construction, railway development and utility construction works.

At the end of December, the month-end stock of orders of construction firms was 129.5% higher than in the previous year. The stock of orders was 16.0% higher for the construction of buildings, and 184.5% higher for civil engineering works than a year earlier.

In the whole year of January–December 2017, compared to 2016, the volume of construction output grew by 29.6% compared to a year earlier. In 2017, the construction of buildings increased by 27.0%, and that of civil engineering works by 34.8%.

At current prices, output reached HUF 2,495 billion for the full year of 2017, compared to HUF 1,813 bln in 2016, KSH data show.

Producer prices up over 5% in 2017

In the year as a whole, construction producer prices rose by an average of 5.2% compared to 2016.

In the fourth quarter, construction producer prices rose by 6.5% compared to the same period of the previous year. Within the divisions of construction, prices increased by 9.8% in the construction of buildings, by 4.1% in civil engineering works, and by 6.9% in specialized construction activities, the latter representing the greatest weight in construction compared to Q4 2016.

Construction prices increased by 1.6% quarter-on-quarter.

Commenting on the construction data to state news agency MTI, K&H Bank chief analyst Dávid Németh said a high order stock points to continued strong growth this year, but capacity constraints, especially the ongoing labor shortage, could reduce the rate of increase. He put full-year growth at over 10%.

TakarékBank analyst András Horváth concurred that the sectorʼs growth would continue, evident from the order stock and strong demand for both residential and office property. The impetus could be preserved, he added, if the government were to extend preferential VAT rates for home construction, set to expire at the end of 2019.

Data for the construction sector in January 2018 will be published by the KSH on March 14.