The decrease in output in November was somewhat larger than the 12.8 percent annual fall in October 2016. KSH attributed the November drop to the high base and projects that wound up at the end of 2015, the deadline for spending grants available during the previous European Union funding cycle.

Utilities companies were the ones that cut back the most on new construction. Output of the buildings segment was down by 2.5 percent and civil engineering output dived 25.7 percent. In absolute terms, construction sector output reached 187.2 billion forints (EUR 609m) in November.

Construction sector output fell by 19.2 percent in the first eleven months of 2016 as output in the buildings segment declined by 3.4 percent and civil engineering output was down by 33.7 percent.

In absolute terms sectoral output was 1,600 billion forints in January-November, down from 1,928 billion during the same period a year earlier. Gergely Urmossy, senior macroeconomic analyst at Erste Bank, said data show the effects of lower EU funding, but in a few months’ time, spring 2017 construction sector output could stop falling, or even start growing a bit.

However, both in the short and long term labour shortage could create a bottleneck for the sector. László Balogh, a market expert at real estate broker Ingatlan.com, said construction sector output could adopt a healthier structure as home buildings and not only EU-funded construction projects could contribute to output growth.

Republished with permission of Hungary Matters, MTI’s daily newsletter.