European Construction Output Declined for Second Month in June

By Simone Meier

Aug. 19 (Bloomberg) -- European construction output declined for a second month in June even as the region’s recession eased.

Construction in the 16-member euro region dropped 1.1 percent from May, when it fell 2 percent, the European Union’s statistics office in Luxembourg said in a statement today. From a year earlier, output declined 8.8 percent.

European builders have been forced to reduce spending and jobs after the global recession eroded demand for new housing and infrastructure. Hochtief AG, Germany’s largest construction company, on Aug. 14 forecast a drop in full-year orders. The euro-area economy barely contracted in the second quarter after governments pledged billions of euros to fight the crisis and Germany and France unexpectedly returned to growth.

“European builders were severely hit by the global downturn,” said Stefan Bielmeier, chief German economist at Deutsche Bank AG in Frankfurt. “We’ll only see a very gradual recovery in construction output in the year’s second half, mainly driven by fiscal spending.”

In Spain, construction declined 0.2 percent in June from the previous month and 12.6 percent from a year earlier, today’s report showed. Output in France, the euro region’s second- largest economy, fell 0.2 percent in the month and 4.6 percent on the year. Germany, Europe’s biggest economy, saw a drop of 1.4 percent from May and a 1.2 percent gain from a year earlier.

The euro was lower against the dollar following a report earlier today that showed German producer prices declined at the fastest pace in 60 years in July. The European currency traded at $1.4104 at 9:50 a.m. in London, down 0.2 percent. The Dow Jones Stoxx 600 Index of European shares dropped 1.2 percent.

Investor Confidence

The euro-area economy shrank 0.1 percent in the second quarter from the previous three months, when it contracted a record 2.5 percent. Germany and France showed growth of 0.3 percent, while the economies of Spain, the Netherlands and Italy continued to shrink.

Adding to signs of recovery, German investor confidence jumped to the highest in more than three years in August after government stimulus measures and rising exports pulled the economy out of recession. The ZEW Center for European Economic Research said yesterday that its index of investor and analyst expectations rose to 56.1 from 39.5 in July.

European investor sentiment rose to a one-year high in August and economic confidence increased more than economists forecast in July. Manufacturing and service industries probably contracted at the slowest pace in 12 months in August, according to the median estimate of 11 economists in a Bloomberg News survey. Markit Economics will release that report on Aug. 21.

To contact the reporter on this story: Simone Meier in Frankfurt at smeier@bloomberg.net