Construction-assembly production definitely awakened from its winter slumber
In accordance with the data published by the GUS, the construction-assembly production shrank by 4.2% YoY in April vs. -10.7% in March, running above the market consensus (-8.0%) and our forecast (-9.0%). A year-on-year construction-assembly production growth in April resulted from a combination of such factors as the easing out of the last year’s low base effect favouring production growth, statistical effects resulting from an unfavourable difference in the number of business days (in March 2021 there was one day more comparing to the preceding year, while in April 2021 the number of business days was the same) and the initial stage of recovery in the construction sector. Seasonally-adjusted construction-assembly production increased by 5.0% MoM in April, which represented the strongest monthly growth since February 2019. Consequently, losses caused by harsh winter that reduced the activity in the construction sector in January and February 2021 were recovered almost in full in March and April. Despite a relatively strong recovery, construction-assembly production in April 2021 was still lower by 11.1% comparing to February 2020, which was the last month when the domestic construction sector was not affected strongly by the pandemic.
A boom in the construction sector begins
In our opinion, the data on construction-assembly production in April mark the beginning of a boom in the Polish construction sector. During the first phase, it will be primarily driven by housing investments of households supported by a favourable situation in the labour market, and by the NBP interest rates, which we expect to stabilise on a historically low level in the quarters to come. Our opinion is supported by today’s data on activity in the housing construction sector. In April, the number of dwellings for which permits had been granted rose by 62.0% YoY comparing to a 55.3% growth in March, which represents the strongest growth since April 2007, and the number of dwellings in which construction had begun rose by 92.4% YoY comparing to a 60.5% in March, this being the strongest growth since January 2007. Those trends are consistent with the data on construction-assembly production structure in April, which indicate a relatively strong sales growth for units specialising in the construction of buildings (1.3% YoY) and units carrying out specialised construction activities (0.3% YoY) as opposed to a relatively low production dynamics in units specialising in civil engineering (a drop of 11.1% YoY), which results from a still limited investment activity in the public sector. During the second phase, which will be clearly seen in the second half of 2021, construction-assembly production will be increasingly supported by companies’ investments, including in particular investment expenditures in the manufacturing sector. During the third phase, which is expected to begin in 2022, the activity in the construction sector will additionally be supported by an increase in public expenditures on infrastructure financed with the funds obtained from the multi-year EU budget and Recovery Fund.
Today’s data on construction-assembly production in April is slightly positive for the PLN and the yields on bonds.