|
Report
from
Europe
German and UK recovery boost European GDP
The Eurpean economy has climbed out of recession and,
after six years of trauma, appears to be on the mend. The
countries that required European Union-backed rescues
are beginning to exit these.
However the latest GDP figures (released on May 15 by
Eurostat) indicate that the recovery is very slow and
tentative (Chart 1).
GDP in the 18-nation euro-zone expanded by just 0.2% in
the first quarter of 2014, half the figure economists were
projecting. Total EU growth in the first quarter was only a
little higher at 0.25%, despite a strong performance by the
UK outside the euro-zone where the economy expanded
by 0.75%.
Germany, as usual, was the leader amongst European
countries, posting a gain of 0.8%. After a very long period
of economic contraction, Spain‟s economy is now growing
modestly, expanding 0.4% in the first quarter of 2014.
More positively, economic sentiment in Europe has
continued to rise sharply in recent months (Chart 2). The
rise is apparent across the EU but is particularly dramatic
in the UK and Germany.
Improvement in this indicator implies that both consumer
and investor confidence will continue to rise during the
European summer.
However, economic conditions in other countries of
Southern Europe remain fragile. Italy's economy shrank by
0.1% in the first three months of 2014, matching the
average of the three previous quarters.
France‟s recovery has faltered. France recorded zero
growth in the first quarter of 2014, a big downturn
compared to expansion of 0.6% in Q2 2013.
Portugal shrank 0.7% in the first quarter of 2014,
following positive numbers in the preceding nine months.
While figures weren't available for Greece in Q1, the signs
there are not good. Greek GDP dropped 2.5% in the final
three months of last year.
Economic growth in the EU is likely to remain very slow
this year. The latest forecast from the International
Monetary Fund estimates euro-zone GDP will expand a
mere 1.2% in 2014, compared with 2.8% for the U.S.
With prices barely rising, there is mounting concern that
the euro-zone could plunge into debilitating deflation. This
would make the debt burden of Europe‟s weakest
economies even heavier.
Europe has also made little progress in solving its‟
significant unemployment problem. The latest euro-zone
jobless rate is 11.8%, only marginally better than 12% a
year ago.
Only limited progress has been made to liberalise overregulated
labour markets which dampen job prospects
throughout much of Europe.
There is also conflict between European politicians‟ need
to encourage further economic integration to resolve the
problems of the euro-zone and the increasing
disenchantment of many EU citizens with centralised
control from Brussels.
EU construction ¨C uninspiring forecasts for 2014
Europe‟s construction sector is by far the most important
driver of timber demand in the region. Recovery in this
sector has been even weaker than in the overall economy.
There has been only a slow and faltering increase in the
Eurostat construction production index since it hit an alltime
low in March 2013 (Chart 3).
Construction production in Germany, Poland, and
Belgium has strengthened significantly in 2014.
Construction production has also improved significantly in
Spain this year, although from a very low level.
Smaller gains have been made in the UK and the
Netherlands. However construction production has been
flat in France and continues to fall in Italy.
Modest improvement in construction expected from
2015
Various indicators of future construction activity suggest
that the overall EU market will remain static at a low level
in 2014. There is potential for a slow but sustained
recovery to start next year, led by the UK and Germany
and spreading into Belgium, Netherlands and Poland.
There was gradual improvement in Eurostat‟s EU-wide
construction confidence index (CCI) between March 2013
and March 2014 (Chart 4). However the CCI declined
slightly in April 2014 and remains firmly in negative
territory.
This means that a balance of those surveyed still believe
order books and employment in construction will continue
to decline in the following 3 months.
The German CCI remains high relative to other EU
countries but weakened a little in the opening months of
2014. The UK CCI, which increased sharply over the
winter months, has now flattened out at a higher level. The
Belgium CCI has also remained static in recent months but
is at least higher than in most other EU countries.
Confidence in the Netherlands construction sector has
improved significantly over the last 12 months after hitting
a very deep low at the start of 2013. Construction
confidence in France, Italy and Spain remains at a low
level.
The latest EU-wide building permits data, for the last
quarter of 2013, is not encouraging from the perspective of
future construction activity (Chart 5). The numbers of
building permits issued across the continent continued to
decline throughout last year.
While there was a rise in permits issued in Germany, the
UK and Belgium, this was offset by declining permits in
Italy, Spain, France, the Netherlands and Poland.
First quarter 2014 data for building permits from those few
countries that have reported so far is more encouraging.
Building permits issued in Germany have continued to rise
this year, while there has also been a sharp rebound in
building permits issued in the Netherlands.
Value of EU construction forecast to fall in 2014
The independent research organisation ¡°Archi-vision¡±
estimates that total European construction value will fall
from €830 billion in 2013 to €820 billion this year (Chart
6).
However, construction value is expected to rebound to
€830 billion in 2015 and €845 billion in 2016. These
forecasts draw on Archi-vision‟s quarterly survey of 1600
architects across the EU combined with analysis of other
European construction industry data.
Archi-vision forecast that construction value will rise at
around 2% per year in the UK, Germany, Netherlands and
Belgium between 2014 and 2016. Construction value is
expected to remain static in France and Poland during this
period.
Construction value is expected to continue to fall in Italy
and Spain during 2014 and 2015 before stabilising at a low
level in 2016.
Improvement in EU joinery production in first quarter
of 2014
Overall joinery activity in the EU was static at a low level
in the first nine months of 2013 and then fell sharply in the
last quarter. However, activity picked up a little in the first
quarter of 2014 (Chart 7).
In line with forecasts for the European economy and
construction industry as a whole, joinery activity across
the region is expected to recover only slowly during 2014.
Of all European countries, only Germany has maintained
comparatively high levels of joinery activity over the last
two years.
Recovery in the EU joinery sector is expected to be led by
continued good levels of activity in Germany and a
relatively strong rise in the UK.
UK construction recovery now stronger and broader
The UK Construction Products Association (CPA)‟s latest
forecasts highlight that the recovery in UK construction is
becoming stronger and broader.
Rapid increases in private house building, together with
growth in the infrastructure and commercial sectors, will
drive activity. CPA forecast 4.5% growth in 2014 and a
further rise of 4.8% in 2015.
According to CPA, UK private housing starts are set to
rise 18.0% in 2014 and 10.0% in 2015, before falling to
5.0% in 2016 and 2017.
The current rise is assisted by a „Help to Buy‟ scheme,
which is subsidising mortgage provision, in addition to a
strengthening UK economy.
Growth in private housing should lead also to increases in
public housing. UK planning consent now usually requires
provision of some public housing as part of large-scale
private developments. CPA forecasts that public housing
starts will rise 8.0% in 2014 and 5.0% in 2015.
The UK‟s private housing repair, maintenance and
improvement sub-sector is forecast to rise 3.5% in 2014
and a further 4.0% in 2015. The CPA note that such
growth is well below potential given considerable demand
for energy efficiency measures in the UK's existing
housing stock.
Poor implementation and lack of decent incentives has led
to only poor uptake of the UK government's "Green Deal"
and ECO schemes designed to increase work in this area.
Commercial offices construction remains one of the
largest single components of UK construction and is
expected to increase 7.0% in 2014 and 10.0% in 2015,
although most growth will be concentrated in London.
Rising consumer confidence and pent-up demand for
refurbishment mean that activity in the UK retail subsector
should increase 4.0% in 2014 and 8.0% in 2015.
Public sector construction is forecast to marginally rise
0.7% in 2014 and 2.3% in 2015 as schools and hospitals
projects finally get underway after long delays during the
period of austerity.
Downturn in EU imports of joinery products
With the exception of flooring products, imports
contribute only a small proportion of total EU
consumption of joinery products. In terms of value, only
around 4.5% of doors and glulam, and around 0.5% of
wood windows installed in the EU are imported from
outside the region.
This is indicative of the very strong commercial benefits
from proximity to the consumer in the joinery sector and
the essential need for detailed knowledge of national
construction markets.
The EU imported wooden doors with total value of €275
million in 2013, 2.8% less than the previous year (Chart
8). The value of wooden door imports from China, the
largest non-EU supplier, fell 6.8% to €88.5 million in
2013.
However imports increased from Indonesia and Malaysia -
the second and third largest non-EU suppliers. Imports
from Indonesia rose 2.6% to €75.4 million in 2013.
Imports from Malaysia were up 6.3% at €38 million.
The EU imported 111,700 m3 of glulam in 2013, 9.5%
less than the same period in 2012 (Chart 9). During 2013
there was a significant fall in imports from Malaysia,
Indonesia and Russia, the three largest external suppliers
of glulam to the EU.
Imports from China, the fourth largest external supplier
were at a similar level to the previous year. Imports of
glulam from Vietnam increased slightly. The European
glulam market is currently suffering from saturation, with
too much production chasing limited demand.
EU imports of wood windows were €23.1 million in 2013,
17.6% less than the previous year (Chart 10). Most of
these imports derive from other European countries,
notably Norway, Bosnia and Switzerland.
Imports from China, the largest supplier outside Europe,
were only €2.1 million in 2013, 45% less than the previous
year. Chart 11 provides more detail of recent trends in EU
markets for joinery products imported from China.
Imports of wooden doors from China increased into the
UK, Ireland and Romania during 2013, but declined into
France, Belgium and the Netherlands. German and Danish
imports of Chinese glulam increased during 2013, but this
was insufficient to offset declining imports into UK, Italy,
and Belgium.
EU imports of wooden windows from China have been
mainly destined for France and Poland, both markets
which weakened significantly in 2013.
European flooring industry reports continuing
challenges
Discussions at the spring meeting of the European wood
flooring manufacturers association FEP indicate that the
industry continues to face major challenges. There are
some signs of improving demand in a few countries and of
a more stable situation in others.
However the market remains very difficult in Southern
Europe. Lack of consumer confidence, the weak European
construction sector as well as an ever increasing
competition are daily challenges for the European wood
flooring industry.
FEP country representatives reported as follows:
Austria: a small increase of around 1% is
forecast in consumption in the first quarter of
2014 compared to Q1 2013. There is increasing
competition for wood flooring from Luxury
Vinyl Tiles (VLT).
Belgium: the wood flooring market has
stabilised. Although total construction output fell
1.3% in 2013, there was improvement in nonresidential
construction, both new build (+2.2%)
and renovation (+1%).
Denmark: parquet sales were static at a low level
in the first quarter of 2014, but the market is
expected to grow by a few percentage points
during the whole of the year.
Finland: parquet consumption is expected to
remain stable during 2014 with total sales of
around 1 million m2.
France: the year 2014 started badly with parquet
sales down an estimated 8% to 10% in the first
quarter of 2014 compared to the same period in
2013. Consumer confidence is still lacking.
Traditional retailers no longer regard wood
flooring as a priority product. Competition with
other flooring types is becoming even more
intense.
Germany: Despite the good economic situation
in Germany, the parquet market remains static
with zero growth expected this year and intense
competition from other products. As in the past,
wider boards are becoming increasingly popular.
DIY stores are moving towards new products
such as LVT.
Italy: parquet consumption is estimated to have
decreased by 10% in the first quarter of 2014
compared to the same period in 2013. Conditions
are very uncertain with a lot of new competitors
on the market.
Netherlands: After a very poor year in 2012, the
market stabilised in 2013. First quarter sales in
2014 were the same as in the first quarter of
2013.
Norway: sales increased by around 2% in the
first quarter of 2014 compared to the same period
in 2013. Imports of building materials into
Norway increased by 18% in the first 3 months of
2014, an indication of an active market.
Spain: parquet sales in the first quarter of 2014
were down 5% compared to the same period of
last year. However, there is a slow rise in
optimism as some macroeconomic indicators are
recovering.
Sweden: parquet consumption was up around 2%
in the first quarter of 2014 compared to the same
period in 2013. The housing sector is starting to
recover.
Switzerland: a very mild winter meant that
parquet sales in the first quarter of 2014 were 5%
higher than the same period in 2013. Wood
flooring remains popular and the market mood is
good.
| 
