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Activity in construction
Real Estate Watch
Renewed dynamism of construction in Spain
In the early months of 2006, construction showed renewed buoyancy in Spain. This led to a more dynamic growth rate than in the previous quarter and everything suggests that this trend will be maintained over the year. Construction continues to be one of the most active segments of the Spanish economy.
So far this year, the leading activity indicators have been rising at a faster pace, especially in the residential segment. Over the year as a whole, the building segment can be expected to pick up, while civil works will grow slightly more slowly, which implies that, in National Accounting terms, the sector will advance at an average rate of 6.1% in 2006, similar to the rate registered in 2005. In 2007, the trend is pointing to slower growth in both building and civil works, which will lead construction to fall to an annual increase of around 3.7%.
Supporting this performance, the figures for both the increase in the labour force in construction and for materials consumption in the early months of 2006 show more dynamic growth rates than in 2005, with an increase of 7.3% in employment in the first quarter and of 9% in cement consumption in the first five months of the year.
This positive situation is clearly reflected in sector confidence indicators, which are at a relatively optimistic moment. Contributing to this is the fact that backlog orders in hand guarantee a total of nearly 600 days of work for the sector, 50% more than the average work companies had in the second half of the nineties. The view of sector companies is positive in both building and civil works and the opinion poll suggests that this situation will continue throughout the year, although it is more positive for housing than for the rest of the sector.
The growth of construction activity has led costs in the sector to increase more than costs in the economy as a whole, especially in the case of materials and sundry supplies, which grew at an average rate of 7% in the first four months of 2006. However, labour costs performed more in line with other sectors, rising slightly below inflation. In 2006 cost tensions can be expected to persist in the construction sector, especially in materials.
Investment in civil engineering slows
The growing role played by private initiative in infrastructure financing is making it possible to decouple the pace of investment in civil works from the budgetary cycle of the different administrations, which is lending greater stability to a segment that used to be characterized by very fluctuating performance. This situation brings improvements for investment that result in an increase in activity.
Thus, in the first quarter of this year, investment in civil works grew at a rate of 4.1%, presenting a profile of gentle moderation with respect to 2005, according to what can be seen in the National Accounting figures. For the year as a whole, the segment will grow at an average rate of nearly 5%, one point below the average rate observed in 2005.
Table 2.1. Construction
Annual rates of variation
  
 

2004
2005
2006
2007

GFCFc

5.5%

6.1%

6.1%

3.7%
Residential
6.0%
6.0%
7.6%
4.5%
Rest
5.1%
6.1%
4.9%
3.0%
Source: INE and BBVA

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