Construction sector contraction slows in August

Output of Hungary's construction sector fell by an annual 13.6 percent in August, an improvement after a 21.0 percent decline in the previous month, data released by the Central Statistical Office (KSH) on Friday show.

Output of the construction sector started dropping in March, when the first pandemic restrictions were introduced, and the decline reached double digits in May.

In August, output of the building segment declined 17.1 percent and output of the civil engineering segment dropped by 8.9 percent.

In a month-on-month comparison, construction sector output rose by a seasonally and workday-adjusted 1.9 percent.

In absolute terms, construction sector output came to 362.6 billion forints (EUR 994.6m) in August.

Construction sector order stock at the end of August was down 18.4 percent from twelve months earlier, as building orders rose by 11.4 percent but civil engineering orders fell by 30.4 percent.

New order volume was up 6.0 percent, with new orders in the building segment increasing by 16.5 percent and new civil engineering orders dropping by 5.5 percent.

Commenting on the data, a state secretary of the innovation and technology ministry said the sector’s improved performance was a sign of the economy’s recovery from the first wave of the coronavirus pandemic. The construction sector contracted from a high base by 10.4 percent in the first eight months of 2020, a “relatively good performance”, Anita Boros said.

Analyst Andras Horvath of Takarekbank said he expected the construction sector’s output to contract by 9-10 percent this year.

Gabor Regos of economic research institute Szazadveg said the reduction of the VAT rate on new home construction to 5 percent could give a boost to housing constructions but keeping the sector’s performance at a high level would also require boosting large-scale construction projects.

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