Growth supported by foreign production
Production in new construction and also in repairs and maintenance increased significantly, both components recording an increase of 1.6 percent. On the contrary, the construction of roads and other civil engineering structures continued to lag year-on-year. Nevertheless, analysts expect that the construction recovery may gain momentum at least in the second quarter, mainly thanks to new investments, infrastructure projects and support for housing construction.
Data from the Statistical Office of the Slovak Republic indicate that construction companies are increasingly looking for opportunities outside Slovakia. In January, production abroad increased by more than 80 percent, while its share in the overall performance of the sector increased to 14 percent. The main reasons for this trend are lower prices of construction materials in neighboring countries and higher volumes of state investments in Poland, the Czech Republic and Austria.
"The new construction law will also be positive for the construction sector, as well as the production data itself - however, we will not see the full effects until the autumn and especially next year. Today, we expect that the construction industry should gradually experience a recovery after two years of decline," said 365.bank analyst Tomáš Boháček.
Domestic sector holds back costs
Production carried out in Slovakia accounted for 86 percent of construction output. Growth on the domestic market is only showing a slight increase so far. Although new construction and repairs with maintenance recorded a year-on-year increase of 1.6 percent, the construction of roads and civil engineering structures continues to lag behind. Work on civil engineering structures, which also includes the construction of highways, fell by seven full four tenths of a percent year-on-year, and this slowdown has been going on for the ninth month in a row.
"Domestic production should remain subdued at the beginning of this year, primarily due to higher input prices, but we expect a turnaround to come by the end of spring," explains T. Boháček.
Expectations for the coming months
Analysts expect that the situation on the domestic market will begin to improve in the coming months. According to the expert, the main factors will be the announced new infrastructure projects, increased support for state construction, including state-supported rental apartments, and the still persistent low supply of apartments on the real estate market. According to T. Boháček, activities on the domestic market will increase by approximately ten percent.
Analysts consider it a positive signal that production in the construction industry has maintained growth for the third month in a row. In addition to the year-on-year increase of 7.2 percent, it also increased in the month-on-month comparison, by 1.5 percent.
Although the total volume of construction work grew, some segments that are less significant in terms of share still recorded a decline. The other work component fell by almost a third, but its share in the overall performance of the sector is low. "Construction companies have thus maintained higher year-on-year performance for the third month in a row," adds Jana Morháčová, spokeswoman for the Statistical Office of the Slovak Republic.
