Construction Activity Recovering Slowly in Western Europe in 1997, but Still Declining in Austria
In line with the overall cyclical trend, demand for construction is set to pick up gradually in western Europe in 1997. After a fall in output of about 1 percent last year, a rebound of similar magnitude is expected for the current year. The recovery should be driven by renovation works and commercial building activity, while residential construction and building for public administration purposes may decline in volume. Civil engineering may see a slight demand increase, although the scope for public investment remains extremely tight given the need for further fiscal consolidation. The slight increase in infrastructure investment is facilitated by the encouragement of private participation in a number of European countries. Civil engineering is supported by the completion of the European road and railroad networks, with priorities shifting somewhat towards the railroad. The sector should also benefit from higher spending on environmental investment projects. A more sustained upturn in European civil engineering is unlikely, however, in view of the severe budgetary constraints. According to the latest projections for the member countries of the Euroconstruct research group, volume output of civil engineering will rise by 1 percent in 1997, commercial building output by 1½ percent, renovation and adaptation works by 2 percent. Because of the critical outlook for employment and private incomes, and in view of a considerable amount of oversupply, construction of new homes is set to fall by around 1 percent, public administration building by 1½ percent. Austria, Germany and Switzerland are unlikely to participate in the Europe-wide recovery of construction activity. In Austria, output is projected to decline by 0.5 percent, in Germany by 0.8 percent and in Switzerland by as much as 3½ percent. In Austria and Germany, residential construction provided major cyclical stimulus in the first half of the decade. Since 1995, however, the boom has ended in both countries, with the downturn being more severe in Germany. In Austria, the housing stock has been increased considerably over the past years; apartments in the higher-price categories are at present difficult to rent out, and receding housing demand is bound to dampen construction activity further. The announced stimulus from public infrastructure investment projects is slow in getting underway. Major support for the industry may be expected from renovation and adaptation works. While the obligation for the owners of buildings to liquidate financial reserves and use them for renovation purposes (as laid down in the Federal government's fiscal program) is providing some stimulus, the latter is weaker than originally expected and cannot compensate for demand weakness in other parts of the construction sector.
Bauwirtschaft erholt sich in Westeuropa 1997 langsam. In Österreich weiter rückläufig; Construction Activity Recovering Slowly in Western Europe in 1997, but Still Declining in Austria
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