June 21, 2021

Construction goes into recession after two quarters of fall in GDP in 2019 | Economy


Construction it has already chained two quarters in a row at the end of 2019. According to data from the INE, it has entered a recession. Something is appreciated in the consumption of cement, which fell in the last quarter. However, the same is not seen in the employment of this branch, which registers an intense slowdown, but without destroying jobs. In any case, the brick has gone from being an activity that strongly led the recovery to lose traction. Lack of labor, economic slowdown, a weakening demand and uncertainty are affecting. Even so, experts hope that the deterioration will not go further.

Between October and December, construction suffered a quarterly collapse of 1.7% in gross domestic product, which added to the 0.3% decline recorded in the previous quarter. Although lately there is a lot of volatility in the GDP figures and there is a possibility that they will be rectified, since the beginning of 2019 construction has suffered a sharp slowdown. The Bank of Spain already warned of this slowdown in September.


Quarterly variation of the offer

in the construction

After five years of growth, the sector chain two quarters of fall

Quarterly variation of the investment

in the sector

Quarterly variation of the offer

in the construction

After five years of growth, the sector chain two quarters of falls

Quarterly variation of investment in the sector

Quarterly variation of the investment

in the sector

Quarterly variation of the offer

in the construction

After five years of growth, the sector chain two quarters of falls

Construction goes into recession after two quarters of fall in the GDP of 2019



Investment in construction has gone from advancing at annual rates of 7% to retreat 3.5% at the end of 2019. If you take only the construction of housing, it touched growths of 12% a year ago, and now only adds 3%. That is, it loses a lot of bellows but does not fall. The one that is not residential housing does sink: 12%. This category includes private buildings such as industrial buildings, shopping centers or offices, which could have been harmed by the fear of slowing down. But it also includes public works. And judging by the tender data, it seems that in these two factors have weighed: the stoppage of the electoral cycle and the attempts of the Government to control the deficit by freezing investments in the last part of the year.

In addition, the statistics of the Ministry of Development have had problems and have not been able to collect well all public contracts uploaded to the State platform on the Internet, especially those of municipalities. Hence, there may be some upward revision of these figures. Those of the employerial Seopan reveal a slowdown in public procurement less pronounced than those of Development.


Variation of those employed in the sector

Variation of those employed in the sector

Employment continues to increase, but has slowed in the last year

Despite the recovery, the number of employed in the sector is far from the 2012 levels

Variation of those employed in the sector

Variation of those employed in the sector

Employment continues to increase, but has slowed in the last year

Despite the recovery, the number of employed in the sector is far from the 2012 levels

Variation of those employed in the sector

Variation of those employed in the sector

Despite the recovery, those employed in the sector are far from the 2012 levels

Employment continues to increase, but has slowed in the last year

Construction goes into recession after two quarters of fall in the GDP of 2019



The job suffers

That said, construction employment data does not tell exactly the same story. “The recession should be reflected in a fall in jobs in the sector. However, it does not, ”says Francisco Vidal, chief economist at Intermoney. Of course, it experiences a strong deceleration after it came to represent one in four jobs created in 2018. In the active population survey, the occupation grew to 12% at the end of 2018. And 2019 has ended with a small advance of 0 ,3%. “It is the activity that best started the year and the one that stopped the most at the end of 2019,” said María Jesús Fernández, Funcas analyst.

Sector confidence surveys worsened in the last quarter. New construction visas have lost vigor in the accumulated twelve months. And all this coincides with a cooling in housing sales, which drag four consecutive months of year-on-year falls and can close the year with the first setback since the recovery began in 2013. Even so, 2019 will be the second year with more homes sold since the bubble burst after 2018.

It also influences that the Barcelona City Council approved an increase up to 30% of the percentage that the new promotions have to devote to protected housing. According to figures from Catalan promoters, the start of new construction has collapsed in half in the city. There is a lot of noise around statistics and it seems difficult to know for sure what is happening. But worry has jumped. At this rate, can the sector’s slowdown in job destruction end?

“In recent months the loss of momentum has been greater than expected, which has generated some fear of a cycle change in the sector. They have contributed to the entry into force of the new mortgage law, the deterioration of confidence and the slowdown in activity and employment. But we expect this slowdown to be temporary. Our central scenario points to a stabilization of the market with moderate growth rates, which will also make the cycle more sustainable, ”says Nuria Bustamante, director of the Spanish Economy of Bankia Studies.

Although with less force, the factors that push demand still grow and should continue to pull construction. As María Jesús Fernández explains, employment, family income and the number of households continue to increase. There are also more people migrating to the big cities, there are good financial conditions and the rental prices are high and should encourage investment. Experts insist that at the moment there is nothing to point to the disaster. Nor are we seeing excesses that then have to be adjusted like those that occurred with the bubble. Neither in indebtedness nor in the number of houses built.

Uncertainty weighs

Another different factor is uncertainty. “Since the second part of 2019 sales have cooled due to uncertainty. One part is international, which seems to be resolved. But there are still many small and medium investors waiting for how the government regulates the real estate market. If the entire PSOE and Podemos agreement materializes, many may not invest, ”says Fernando Encinar, head of studies at Idealista.

Construction sources say that there has also been a sharp rise in labor costs when not finding workers, especially specialized. From when it is budgeted until a work begins, at least six months pass. In that period, the labor cost is rising so much that it ends the margin and that forces many companies to stop. Last week, the construction company Byco alleged cost increases to declare the bankruptcy proceedings. It is the first large to fall since the crisis.

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