According to the Economic and Steel Market Outlook 2024-2025/Q4 2024 Report from the Economic Committee of the European Steel Association (EUROFER), in the second quarter of 2024 construction output in the EU decreased by 0.4 percent year on year, due to the increase in material prices, labor shortages in some EU countries and increasing economic uncertainty. Most notably, higher interest rates in 2022 and 2023, driven by monetary policy tightening, have also played a key role in the negative trend. While further monetary policy easing is not predictable, it is not ruled out, and could depend on future price developments. Such easing will be key to reducing mortgage rates and improving housing demand.
In the given quarter, in line with real production volumes, investments in construction dropped by 1.7 percent year on year, after a 2.3 percent decrease in the previous quarter. Hit by high mortgage rates, residential construction investment dropped for the ninth consecutive quarter, decreasing by 4.1 percent, the same as the first quarter. Civil engineering projects, on the other hand, recovered by 0.8 percent. Expansion in public construction is projected to continue during 2024, but at a much slower pace.
According to EUROFER, this negative trend is expected to persist until the end of 2024, mainly because of high interest rates. The construction sector output is projected to weaken by 1.3 percent in 2024, with a slightly less pronounced decline compared to the previous estimate of 1.4 percent. EUROFER anticipates the sector will recover in 2025 by 1.3 percent due to the possibility of monetary easing.