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Activity in construction
2. Activity in construction
Promising performance in construction in the EMU
In the early months of 2006, the activity indicators for the construction segment rose slightly in the European Monetary Union as a whole, largely driven by the increase in residential investment. The greater buoyancy of activity in construction is consistent with faster economic growth and the increase in fixed capital which occurred in the EMU in the first quarter of the year. The positive opinions of sector players as regards the performance of backlog orders, which are at the good levels they registered at the beginning of the decade, are pointing to an increase in sector activity in the course of 2006, supported by good momentum in the residential segment.
In the first half of 2006, sector activity continued to present positive growth rates for the third quarter in succession, with a year-on-year increase of 0.9% in the first three months of the year. This advance was the result of expansion in residential activity, which grew at a year-on-year rate of 2.9% and amply offset the 3.4% downturn in investment in civil works executed in the first quarter of this year.
The downturn in civil works was due more to the impact of the adverse weather which hit the centre of Europe at the beginning of the year than to economic factors and, consequently, the segment can be expected to pick up over the year. The good performance of backlog orders in the construction industry anticipates an improvement in the sector as a whole in 2006, which will last into 2007, and will contribute to stronger growth in the EMU, especially in central European countries.
Residential development takes off in Europe
This improvement in activity in the second half of 2005 stemmed from the increase in the industry's backlog orders which, after last year's summer break, were very dynamic, especially in the residential segment. The increase in public investment in infrastructures and stronger residential demand are leading to an increase in the construction business in Europe and, especially in EMU countries. In fact, the reactivation of public works in the United Kingdom and the slower downturn in production in Germany and the countries in its environment explain a good part of the sector recovery.
As a result of this situation, the opinion of sector employers is at the most optimistic levels of the last ten years, both as regards backlog orders and in terms of confidence in the sector. This optimism was also clearly reflected in the number of real estate projects to be developed, as is shown by the 9.8% increase in the number of houses endorsed for construction in the first quarter in the first quarter of 2006 in the EMU as a whole.
From a geographical point of view, the residential segment will mainly be driven by the leading economies in the centre of Europe. In the first quarter of the year, the number of housing endorsements increased by 12% in France and 17% in Germany. In contrast, it was the smaller economies where residential development diminished, as is the case of Greece, Portugal, Finland and Sweden, where the number of houses to be started in 2006 will be lower than in 2005.

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