Construction Declined Slightly Year-on-Year in August

According to recent reports, the construction industry in the Czech Republic experienced a slight year-on-year decline in August. The decline was reduced to 0.2% from the previous month’s 2.1%. While ground construction projects, such as building structures, performed better, engineering construction production, including road building and telecommunication and energy networks, decreased. On a month-to-month basis, the construction industry saw a 2% increase. The Czech Statistical Office (ČSÚ) reported these findings on Monday.

The article highlights that ground construction production increased by 0.6% compared to last year’s period, while engineering construction saw a 2% decline. Petr Dufek, the chief economist at Creditas Bank, noted that this month was more favorable for ground construction. Still, it is essential to consider the lower base in July to which the month-to-month results are compared. He also pointed out the industry’s main challenge: a lack of new orders. This is particularly evident in the private sector, which is not actively engaged in new construction projects due to economic stagnation. Both commercial and residential construction are affected by this trend. High construction material prices persist despite reduced demand, forcing manufacturers to limit their production.

In August, the number of building permits issued by construction authorities decreased by 8.4% compared to the previous year, totaling around 6,800 permits. However, the estimated value of these permits increased. According to Petra Cuřínová, the head of the Construction and Housing Statistics Department at ČSÚ, the estimated value of issued building permits increased by almost one-third. This was influenced by the approval of nine projects with budgets exceeding one billion Czech koruna. Excluding these projects, the estimated value would have increased by only 2%.

The article also mentions a decline in the number of initiated and completed residential units in August compared to the previous year. The number of units that began construction decreased by 23.1% to 3,102, while the number of completed units decreased by 21.8% to 2,792. Petr Dufek added that Prague and the Central Bohemian Region primarily drove this decline. Developers in these regions continue to limit new projects, even in areas that have long suffered from insufficient housing supply, leading to previous significant price increases.

The further reduction in residential construction will continue to limit the supply of new housing units and contribute to declining prices in the Czech market. The slowdown in commercial property construction will have a similar impact.

Regarding employment, the average number of employees in construction companies with 50 or more employees increased by 0.6% compared to the previous year. Furthermore, their average gross monthly wages were 9.7% higher than in August of the last year.

Petr Dufek predicts an overall decline of around 2% in the construction industry throughout the year.