Euroconstruct June 2010

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69th Euroconstruct Conference

Dublin 2010

Dublin Castle, 24th & 25th June 2010

SUMMARY REPORT

Macroeconomic Trends and Forecasts

for the European Construction Market to 2012

Special Topic: Recovery Strategies Positioning the Industry for the Upturn


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DKM Economic Consultants6 Grand Canal Wharf

South Dock Road

RingsendDublin 4

[email protected]

SUMMARY REPORT

69th EUROCONSTRUCT ConferenceDublin, June 24 25, 2010


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DKM Economic [email protected]

Tel +353 1 6670372Fax +353 1 6144499

Table of Contents

The EUROCONSTRUCT Network .......................................................................................................................... 5

The Outlook for the European Economy and Construction Sector to 2012The European Macroeconomic Outlook ................................................................................................................ 27

Statistical Appendix ......................................................................................................................................... 33The European Housing Market .............................................................................................................................. 45

Statistical Appendix ......................................................................................................................................... 63The European Non-Residential Building Market .................................................................................................... 71

Statistical Appendix ......................................................................................................................................... 81The European Civil Engineering Market ................................................................................................................ 93

Statistical Appendix ....................................................................................................................................... 107The European Construction Market ..................................................................................................................... 117

Statistical Appendix ....................................................................................................................................... 141

Recovery Strategies - Positioning the Industry for the UpturnFundingPrivate Financing of Public Projects Recent Market Developments ................................................................. 157Consolidation/DiversificationWill Debt Burdens Force Companies into Consolidation? Does Diversification Offer a Route to Recovery? ...... 161Strategic ThinkingIs Green the Colour of Recovery? ....................................................................................................................... 165InnovationBuilding Added Value The Role of Technical Innovation .................................................................................. 173Identifying Growth Sectors InternationallyHow Companies Can Best Deal With the Changed market ................................................................................. 177Tackling New Markets

Pitfalls, Recovery and Opportunities: Case Studies and Lessons Learned ......................................................... 181

This Country Report has been written and prepared bythe EUROCONSTRUCT organisation from the countryreports of the 19 EUROCONSTRUCT member insti-tutes.

www.euroconstruct.org

EUROCONSTRUCT, Dublin, June 24 25, 2010

Reproduction or passing-on of the whole or parts of the report is strictly forbidden without the prior written ap-proval from DKM, acting on behalf of the EUROCONSTRUCT group.


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DKM Economic Consultants6 Grand Canal Wharf

South Dock RoadRingsend

Dublin 4Ireland

[email protected]

THEEUROCONSTRUCT

NETWORK



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EUROCONSTRUCT, Dublin, June 2010 6

EUROPEAN CONSTRUCTION BUSINESSRESEARCH AND FORECASTING GROUPwww.euroconstruct.org

EUROCONSTRUCT was set up in 1975 by a num-ber of specialised research institutes and consulting

organisations as a study group for constructionanalysis and forecasting. It has since expandedfrom the core group to include almost all WesternEuropean countries (the European Union andEFTA), as well as a number of Eastern Europeancountries. At present, EUROCONSTRUCT hasmember institutes in 19 European countries.

EUROCONSTRUCT'S network also extends to theBaltic States (through our Finnish partner), Japan(Research Institute for Construction and Economy,RICE, Tokyo) and Korea (Construction & EconomyResearch Institute of Korea, CERIK, Seoul).

The aim of EUROCONSTRUCT is to provide deci-sion-makers in the construction sector and relatedmarkets and in ministries, agencies and nationaland international associations with information,analyses and forecasts to enable them to plan theirbusiness more effectively.

Construction markets are regional or even local. Itis, therefore, a great advantage that the analysisand forecasts for these markets are prepared withinthe EUROCONSTRUCT network by competentnational institutes for their respective home markets.

EUROCONSTRUCT'S research and advice focuseson: Short and medium-term forecasts for macro-

economic and detailed construction trends inEurope

Analysis of structural changes, business strate-gies and competition in the European and world-wide construction industry

Market studies for industrial goods and serviceused by the building and infrastructure sectors.

EUROCONSTRUCT'S research and forecasts aredesigned to meet the needs of many types of busi-ness including: Construction contractors and developers; hous-

ing associations; Manufacturers and traders supplying construc-

tion materials, products, equipment and ma-chines; architects and other construction profes-sionals;

Banks, financial and credit institutions; Government departments and national agen-

cies; industry associations;

The Commission of the European Communityand other European organisations.

Each country member of EUROCONSTRUCT hasthe project management resources to offer theircustomers turnkey studies of pan-European scope.

They can guarantee:

Specific know-how and experience in databaseresearch and consulting;

A consistent multinational approach; Expertise in project co-ordination and quality

control; Reports in the languages of the customer's

choice.

Twice a year, EUROCONSTRUCT organises aninternational conference on:

Short-term forecasts by the EUROCONSTRUCTmember institutes for the main market segments(housing, non-residential buildings, infrastructureand civil engineering, all sub-sectors with abreakdown in new work, and renova-tion/modernisation activities) in nineteen Euro-pean countries.

A special issue selected for its medium-termimpact on the construction industry (e.g. demo-graphics, privatisation, lifestyles, technological

change, internationalisation of strategies,changes in the demand and supply structure).

Past and forthcoming conference venues:

December 2006 Munich (Germany)June 2007 Prague (Czech Republic)December 2007 Vienna (Austria)June 2008 Rome (Italy)December 2008 Brussels (Belgium)June 2009 Warsaw (Poland)November 2009 Zurich (Switzerland)

June 2010 Dublin (Ireland)Winter 2010 Budapest (Hungary)Summer 2011 Helsinki (Finland)Winter 2011 Paris (France)Summer 2012 London(United Kingdom)

In addition, EUROCONSTRUCT offers special stud-ies for selected national and international clientsbased on well-founded knowledge of databases,methods, correlations and measures.

For details, please contact the EUROCONSTRUCT

partner institute in your own country.


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7 Member Institutes

MEMBER INSTITUTES

Austria WIFO Austrian Institute of Economic Research

Belgium Aquiec-VkebiAssociation pour la Qualit des Indicateurs conomiques de laConstruction

CzechRepublic

RS PRAHA RS PRAHA, a.s., engineering & consulting organisation

Denmark CIFS Copenhagen Institute for Futures Studies

Finland VTT Building and Transport, Business Intelligence

France BIPE BIPE

Germany IFO IFO Institute for Economic Research

Hungary Build&Econ Building Economy, Art and Architecture Consulting Office

Ireland DKM DKM Economic Consultants

Italy CRESMECentro Ricerche Economiche e Sociologiche di Mercatonell'Edilizia

Netherlands EIB Economic Institute for Construction and Housing

Norway Prognosesenteret AS PS - Building and ConstructionResearch

Poland PAB Polish Construction Research & Forecasting

Portugal ITIC Technical Institute for the Construction Industry

Slovakia EOS EOS - Komercia, a.s

Spain ITeC The Catalonia Institute of Construction Technology

Sweden Prognoscentret AB Prognosesenteret AB (Part of the Analysgruppen AS)

Switzerland KOF ETHSwiss Institute for Business Cycle Research, Swiss FederalInstitute of Technology, Zurich

United

Kingdom Experian Experian Business Strategies


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Austrian Institute of Economic ResearchVienna, Austria

[email protected]

The Leading Provider of Economic Analysis andEconomic Policy Consulting in Austria

WIFO analyses national and international economictrends and supplies short- to medium-term eco-nomic forecasts. Together with our studies on Euro-pean integration, competitiveness and location ofindustries and services, these trends and forecastsprovide the basis for economic policies and corpo-

rate strategies.

Our activities increasingly include commissionedresearch and consulting for domestic and interna-tional decision-making bodies, the European Com-mission, OECD, major business and financial insti-tutions.

Modern empirical methods incorporating the mostcurrent data available and knowledge of the institu-tional and political structures these are the factorsthat guarantee the quality of our work. The use of

international networks as well as our independentand non-partisan approach gives particular weightto our findings.

As a member of ERECO (European Economic Re-search and Advisory Consortium), WIFO has part-ner institutes in Birmingham, Bologna, Cambridge,Madrid, Munich, Paris and Rotterdam.

Main Research FieldsMacroeconomicsPerspectives of the Welfare StateReforms of the Public SectorGlobalisationSustainable DevelopmentKnowledge-Based Economy

Regional and Sector AnalysesAgricultureIndustry, innovation and telecommunicationsConstructionTransport, EnergyBankingTourism, Trade and commercePrivate and public services

WIFO is organised as an association, with member-ship open to organisations and individuals. Contri-butions by economic policy institutions provide thefoundation for basic research and access to thecombined research resources of a pool of about 100highly qualified staff. Our cooperation with sponsorsand members is based on the principles of partner-ship, project orientation and interactive collaboration

Austrian Institute of Economic ResearchArsenal Objekt 20A-1103 ViennaAustriawww.wifo.ac.at

EUROCONSTRUCT contactMargarete [email protected] [email protected]

Michael [email protected] +43 17982601 483


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9 Member Institutes

Aquiec-VkebiBruxelles, Belgium

[email protected]

Association pour la qualit des indicateurs cono-miques de la construction.Vereniging voor kwaliteitsvolle economische-bouwindicatorenAssociation for the Quality of the Economic Indica-tors of the Construction Industry

ActivitiesThe AQUIEC is active in each of the fields thatmake it possible to improve the economic informa-

tion relating to the construction sector.

As a general rule, it operates as a Forum, in whichthe experts coordinate the initiatives relating to theconstruction statistics: drawing up of statistics, qual-ity control and analysis (of the current and forecasteconomic situation) and in which they exchangeinformation that can prove useful for the objectiveachievement of these analyses.

As far as the prospects are concerned, it also oper-ates as a Scientific Council responsible for:

defining the hypotheses selected for the drawingup of the construction prospects: macro-economic hypotheses and others (national in-surance contributions, tax, policies likely to influ-ence the construction industry, etc.);

defining the working method, for checking thepertinence of the macro-econometric model thattranslates the selected hypotheses into con-struction prospects and for advising its manag-ers on the improvements to be made to them;

evaluating, in terms of coherence and probabil-ity, the prospects drawn up by the Construction

Confederation (currently the only one able tocarry out this work in Belgium) on the basis ofthe framework that it has defined (hypothesesand method);

validating (after a possible correction) theprospects drawn up in this manner.

StatusThe AQUIEC, Association for the Quality of theEconomic Indicators of the Construction Industry, isan association of experts whose areas of expertisecover the economic and legislative environment thatdetermines the development of the constructionindustry, as well as the specific characteristics of itsvarious sub-sectors.

Organisation

The AQUIEC operates according to the same prin-ciple as the Institut des Comptes Nationaux (anofficial organisation that draws up the national ac-counts in Belgium), which means that it is a struc-ture made up of a group of specialists who define aworking framework, delegate the practical work,control and validate this work.

The experts of the AQUIEC form a multidisciplinaryteam that includes economists, jurists and special-ists in tax and social matters. Most of them aremembers of the highest authorities that oversee

their areas of expertise: Central Economic Council,Supreme Statistical Council, Economic Club, Su-preme Financial Council, Supreme EmploymentCouncil, etc.

AQUIEC-VKEBI3442 rue du LombardB-1000 BruxellesBelgiumwww.euroconstruct.org

EUROCONSTRUCT contactJean-Pierre Liebaert

[email protected] +32 2 545 57 40fax +32 2 545 59 09


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RS PRAHA, a.s. engineering & consultingPrague, Czech Republic

[email protected]

RS PRAHA, a.s., was established in 1992 as thesuccessor of Institute of Rationalisation in the Con-struction Industry. Main activities of the companyare services in the area of cost estimation in theconstruction industry. Further activities are analysisof the construction industry and prognosis of thefuture development, research in the field of regionaldevelopment and housing problems; all for both

private and public sectors. Headquarter is located inPrague, branch offices are in Brno, Hradec Krlov,Ostrava, Plzen and Cesk Budejovice.

The activities of RS PRAHA extended abroad theCzech Republic long time ago. The company ismember of various international non-governmentassociations interested in monitoring the state andtrends of European and world construction industry(EUROCONSTRUCT, EDIBUILD, ICIS, etc.). RSPRAHA is registered as consulting organisation forPHARE programme in Brussels and also prepares

data for FIEC on behalf of the Czech Republic.

RS PRAHA has a certificate of the Quality ControlSystem CSN ISO 9001 for engineering and consult-ing activities in the construction industry as well asfor studies in the field of regional development andfor SW and database development and delivery.There is regular assessment of the company ratingBaa2.cz by MOODYS CENTRAL EUROPERATING.

Pricing system for constructions and construc-tion works the company is traditional creator of the meth-

ods and databases for cost estimation of theconstruction works, periodically updated dataare published in printed and electronic forms

Real estate, buildings and enterprises valuation the company is expert institute for evaluation of

real-estate, buildings and enterprises price, itsservices are used by various clients includingbanks, insurance companies and courts, clientsare both domestic and foreign

Sector analysis, development studies, strate-gies, TOP ranking lists, marketing studies

statistics, analysis and conception of construc-tion development

economical analysis and development studiesfor construction companies

TOP ranking lists of construction companies andconstruction materials manufacturers

Classifications and categorisations traditional cooperation at the creation of classifi-

cation systems of the construction products re-lated to SKP (Standard Classification of Produc-tion)

categorisation of the products and servicesaccording to assessment of VAT, property de-preciation, repairs and technical improvements

Regional development and housing policy studies of population, settlement and housing

stock in regions and selected towns at theCzech Republic territory

processing of housing policy conceptions fortowns and regions of the Czech Republic(analysis, prognosis)

maintaining of territorial identification registryand pattern of basic settlement units

Courses and seminars the company organises the seminars and

courses for quantity surveyors and cost estima-tors

RS PRAHA, a.s.engineering & consultingPrask 18102 00, Praha 10Czech [email protected]

Euroconstruct contactJan Blahonovsky

[email protected] +420 549 133 435


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11 Member Institutes

The Copenhagen Institute for Futures StudiesCopenhagen, Denmark

[email protected]

Future-based innovationThe Copenhagen Institute for Futures Studies isan independent research organisation, founded1970. It functions as consultant and source of inspi-ration to corporations, government bodies, andother elements of society, globally. The CIFS cre-ates visions of the future, tailor-made to the need ofclients in relation to corporate development, productdevelopment, etc., supported by a staff of 25, and itruns training programmes related to corporate workwithin trends, uncertainties and innovation for thefuture.

The range of products and services is large, rangingfrom presentations to tailor-made studies in fieldslike strategic development, product development,scenario building, and futures awareness in general.Tailor-made studies are based on a dialogue withthe client, combining the specific knowledge of theclient with the methods as well as the broad per-spective of the CIFS.

Specific to the construction sector, the institute runsprogrammes on The Home and Family of the Fu-ture, The Office of the Future, and Creating Long-term Value in Construction, besides theEUROCONSTRUCT activities and programmescovering a wide range of Transportation issues.

Other fields of study include the future of work, oforganisations and the value chain, of the informationeconomy and the transformations it brings to west-ern culture (the dream society), of growing em-phasis on expression (creative man), of trends infinancial services, retail, marketing, consumption,leisure and lifestyles, of values, politics, and media,of e-business and of physical products Designingfor the Future. The CIFS does tailor-made innova-tion support for corporations within product devel-opment, overall strategy and organisation develop-ment.

The CIFS offers a comprehensive membershipprogramme. The membership base of about 160organisations include leading corporations, govern-ment ministries, and a diverse grouping of publicand private organisations from Western Europe.International memberships are highly tailor-made tothe needs of the client. Working languages includeEnglish, German, French, Danish, Norwegian, andSwedish.

The Copenhagen Institute for Futures StudiesNrre Farimagsgade 65DK-1364 Copenhagen KDenmarkphone +45 33 11 71 76fax +45 33 32 77 [email protected]

www.cifs.dk

Euroconstruct contactAnders Bjerre, senior [email protected]


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VTT Technical Research Centre of FinlandTampere, Finland

[email protected]

VTT Technical Research Centre of Finland (VTT) isthe largest R&D institute in the Nordic countries.VTT's expertise covers all industry sectors. VTT is agovernment, non profit, independent and impartialorganization. VTT's turnover is 240 Meur of which2/3 is based on contract research and -projects.VTT has subsidiaries in Brussels, Silicon Valley, St.Petersburg and Shanghai.

VTT as a Foresight Partner Provides an Access toWide Array of Expertise VTT's tailored foresight reports and consultancy

support decision and policy making process inbudgeting, strategic planning, investment deci-sions and new business concepts

VTT's expert organisation offers access to lead-ing-edge expertise in different industries.

VTT roadmap experts have extensive experi-ence in the coordination of participatory proc-esses and the facilitation of international work-shops.

VTT knowledge solutions scan and analyse thelatest business and technology advances. VTT'sKnowledge Solutions has access to diverseglobal expertise data bases and other reliable in-formation sources.

VTT's networks and research collaborators offerfurther possibilities for innovations.

VTT's activities in fields of business and processmanagement in building and construction are: analyses and prognoses of business environ-

ment: business cycles, market outlooks, scenar-ios business and technology strategy consulting development of new business and service con-

cepts customer needs, productivity, prices, costs and

quality, value chains and networking

energy efficiency, ICT applications and renova-tion concepts are our main themes in 2008

VTT Real Estate and Construction works inten-sively in the building market and demand forecastsector in close contact with contractors, materialproducers, trade, authorities and industry organisa-tions.

Foresight work will be continuously done for almostall important sectors, products and materials in

building and construction. On base of the geo-economic location and long co-operation, the con-struction sector development in Russia and in thewhole Baltic RIM area is more important as ourworking area. We are improving our networks, fore-casting methods, databases, tools and reportingconcerning especially Moscow, St. Petersburg andthe Baltic Countries. We have also close co-operation with some members of the AsiaConstructnetwork.

VTT Technical Research Centre of FinlandTekniikankatu 1TampereP.O. Box 1300, FIN-02044 VTTFinlandphone +358 20 722 111fax +358 20 722 3497Business ID [email protected]

Euroconstruct contactMr. Pekka Pajakkala, Vice [email protected]. Erkki Lehtinen, Chief Research [email protected]. Liisa Jaakkonen, Data System [email protected]


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BIPEIssy-les-Moulineaux Cedex - France

[email protected]

Providing guidance to executivesAccess to unlimited information leads to a muddledvision of today's world and a confused picture ofwhat the future holds. However, in order to makethe right decisions and manage economic risks,decision-makers need key information regarding

future economic developments. For fifty years,BIPE, one of the leading European providers offorward-looking economic analyses and consultingservices, has provided executives with relevantadvice to guide their actions.

Our mission: helping executives to better orienttheir strategyBIPE's consultants communicate their understand-ing and knowledge of economic mechanisms, theinteractions between various entities, the challengesthey face and the strategies they are likely to adopt.

BIPE's mission is to help executives identify oppor-tunities and control risks to better direct their strate-gic actions.

Our commitment: providing clear messages ontomorrow's developmentsTo that end, BIPE analyses how and to what extentdecisions and regulatory changes impact futuremarket developments, clients and competitors. BIPEfavours dialogue between diverse individuals and/orstructures in order to promote clarity and relevance.

Our vocation: providing objective and inde-pendent guidanceObjectivity as regards analysing the strategy andthe potential development of an organisation.BIPE's outward looking approach helps decision-makers stand back from internal opinions which areoften tinged with or influenced by corporate culture.Independence: BIPE is autonomous vis--vis lobby-ists or public authorities.

BIPE's expertiseOur actions include: decision support and advice on business strat-

egy: definition of strategies, products, prices, ac-tivities and markets; forward-looking analysis ofthe business and competitive environments;

sector trends and forecasts; assistance in elaborating, defining and assess-

ing public policies; advice on economic regulations for both compa-

nies and public authorities.

By providing them with forward-looking guid-ance on their environment, we help businessesto: anticipate and respond to market disturbances; reinforce their competitive position; base the company's budget on realistic assump-

tions; prepare their marketing strategy with a better

understanding of their customers and theirgrowth potential;

elaborate and/or support the definition and theimplementation of strategic projects, includinginvestment, employment and training aspects;

understand relationships between companieswithin a given sector and/or cluster and the waythese relationships must evolve;

gauge the consequences of regulatory or fiscal

changes on the company and/or sectors.

In addition, we help public authorities to: understand the roles of the different actors and

the trends thereof (for example, what is the fu-ture dominant organisational model in a sector,or the likely response of businesses to regula-tory or other proposed changes);

anticipate short, medium and long-term markettrends and identify the factors underlying thesechanges;

interact with the private sector, understand the

needs of businesses and develop jointly suitablestrategies;

define what regulatory or fiscal changes are


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necessary and measure their consequences; develop economic regulatory instruments, pilot

and evaluate public actions in the economy.

Our key strengths include:

comprehensive technical and quantitative ana-lytical skills;

an in-depth knowledge of European integrationissues;

an extensive network of contacts: thanks to ourproject work and participation in various industryfora we have developed solid contacts amongstsenior industry figures;

sound experience of working internationally; a proven ability to build and manage teams for

major projects. Our project teams are comprisedof highly qualified professionals experienced in

the study and analysis of detailed sector or is-sue, recognised for their ability to produce prac-tical and effective solutions. Over the years, wehave built a global network of associate expertsthat are able to bring considerable industryknowledge and experience to our consulting pro-

jects; multi-language capability and good cultural un-

derstanding. Members of our staff are able fullyconversant in French, German, English, Span-ish, Portuguese, and Italian, among other, anessential requirement for operation in diverse

environments and markets; a good brand name: we have developed a high

reputation for the quality of our analyses and ourability to respond to the needs of our customers.

In all their assignments, BIPEs consultants basetheir recommendations on tried and tested method-ologies, some of which are proprietary and adaptedto decision-makers needs. A number of economet-ric and modelling software packages are availablewithin BIPE, among which SAS, E*Views, SPSS,

Chasem, Eole, Map info. BIPE also has a number ofproprietary modelling tools that are used to prepareinternally and to test the impact on economy and onspecific sectors of changes in economic policy orshocks in the external environment. Some of thesemodels are comprehensive, sectoral models detail-ing cross-sector linkages across a wide range ofindustries and service sectors, while others allow toanalyse the impact of changes in a sectors per-formance on certain variables.

BIPE has a number of European partners, amongwhich Eurostrategies, Euroconstruct, AIECE(Association of European Conjuncture Institutes).

BIPE has a quality certification from the OPQCM inthe fields of strategy and corporate policy, marketingand commercial and internationalisation of busi-nesses.

BIPE

11/13 rue Ren Jacques92138 Issy-les-Moulineaux CedexFranceTl: + 33 (0)1 70 37 23 23fax: + 33 (0)1 70 37 23 00www.bipe.com

Euroconstruct contacte-mail: [email protected]


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Ifo Institute for Economic Researchat the University of MunichMunich, Germany

[email protected]

Field of ActivitiesThe Ifo Institute for Economic Research is one ofthe major German economic research institutes. Itexamines short-term developments in the overalleconomy and in individual sectors as well as longerterm tendencies and structural changes of the Ger-man and European economy. The institute regularlyconducts short-term forecasts, medium-term busi-ness cycle perspectives and long-term growth sce-narios, both for the economy as the whole and forindividual sectors and industries (e.g. constructionindustry with sub-sectors, types of work and catego-ries of buildings).In its various business surveys theinstitute gathers and analyses data from more than7,000 German firms monthly. The Ifo Institute pub-lishes since more than 50 years the main surveyfindings, e.g. the well known Ifo Business Climate.Since 1981, the Ifo Institute has conducted its WorldEconomic Survey (WES) amongst more than 1,100business leaders and economists in about 90 coun-

tries. Every quarter, these experts assess the pre-sent and the prospective economic situation in theircountries. Special attention is given to the earlydetection of emerging economic problems. Theinstitute also analyses current and projected eco-nomic policy measures and puts forward its owneconomic policyrecommendations.

Setting-up and StatusThe Ifo Institute was founded in 1949 in Munich as anon-profit, independent research organisation and

has the legal status of a registered society. Since2002 there is an institutional link to the Universityof Munich as basis for a strong co-operation. TheIfo Institute has more than 400 corporate and institu-tional members, mainly enterprises, associations,foundations, interest groups and political parties.

OrganisationSince 2008, the Ifo Institute is structured in thefollowing eight research and service divisions: Busi-ness Cycle Analyses and Surveys, Public Finance,Social Policy and Labour Markets, Human Capitaland Innovation, Industry Branch Research (withResearch Unit Construction and Real Estate), Envi-ronment and Transportation, International Tradeand Foreign Direct Investment, International Institu-tional Comparisons.

ResourcesWith more than 160 staff members, the Ifo Institutecovers the whole spectrum of economic activity.Over 60 percent of the Institute's funds are providedby the government, according to the generalagreement on joint financial support of research inGermany. The remaining more than 30 percent ofthe funds are mainly raised through contract re-search, multi client studies, conference fees and

foundation grants. The research contracts are pri-marily awarded by federal and state ministries,international organisations and the EU Commission,business associations and private companies.Membership fees and the sale of the institute'svarious publications contribute also to the funding ofthe organisation.

Ifo Institute for Economic Research at the University of Munich

Poschingerstrasse 581679 MunichGermanyphone +49 89 9224 1383fax +49 89 907795 1383www.cesifo-group.de

Euroconstruct contactErich [email protected]


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DKM Economic ConsultantsDublin, Ireland

[email protected]

DKM Economic Consultants is one of the longest-established economic research firms in Ireland. Thefirm was founded in 1981 as part of Davy Stockbro-kers, and was bought out by its management teamin March 2006.

Over the past two-and-a-half decades DKM hasbuilt up unparalleled expertise across a wide rangeof areas in applied economics and economic fore-casting. The firm offers a range of economic con-

sulting services including data collection, analysisand economic forecasting across national, regionaland sectoral levels; impact analysis; cost benefitanalysis and project evaluation. DKM staff workclosely with clients to determine what indicators aremost relevant to their business and helps them withbusiness planning by forecasting the economicenvironment in which future business activity willtake place.

Our Main Areas of Expertise Construction and Housing

Transport Energy Markets and Competition The Environment Macroeconomic Environment, Demographics

and Forecasting Socio-economic, Regional and Local Develop-

ment.

We Can Provide Project Appraisal and Cost Benefit Analysis Market Analysis, Competition Studies and De-

mand Forecasting Regulatory, Fiscal and Economic Impact Analy-

sis Socio-economic and Regional Development

Studies Regional and National Demographic Forecasts Expert Witness Services Budget Submissions and Position Papers Environmental Economic Studies Corporate Strategy/Business Planning Studies

Our ClientsThe firm's clients include many of the largest com-panies in Ireland. In addition it has acted as eco-nomic consultants to many Government Depart-ments, Local Authorities and State Agencies, andthe EU Commission. Its personnel have been mem-bers of and advisors to many State boards andcouncils, including the Industrial Development Au-thority, the National Competitiveness Council, andregularly act as expert witnesses in legal cases

dealing with complex economic issues. DKM hasbeen the Irish member of Euroconstruct(www.euroconstruct.org) since 1993.

Our Experience in Housing and ConstructionDKM has extensive experience of the Irish housingand construction sector and a track record in eco-nomic forecasting for that sector. The firm has actedas consultants to the Department of the Environ-ment, Heritage and Local Government over the pastdecade, responsible for (i) the preparation of theofficial estimates of national and regional construc-

tion output, (ii) the completion of an assessment themedium term outlook for construction and employ-ment and (iii) examining the challenges facing theindustry over the medium term. More recently, thefirm has been engaged to prepare the quarterlystatistical series, Construction Indicators, whichtracks levels of activity and statistical trends in theconstruction sector. DKM's vast knowledge of theconstruction sector leaves it uniquely placed toprovide insight and added value to public and pri-vate sector decision-makers.

DKM Economic Consultants6 Grand Canal WharfSouth Dock RoadRingsendDublin 4Irelandphone +353 1 667 0372fax +353 1 614 [email protected]

EUROCONSTRUCT contact:[email protected]


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CRESME RICERCHE SPARome, Italy

[email protected]

CRESME is a non-profit association created in 1962in favour of promotion and information on construc-tion industry and territory transformations. Its pur-pose is to carry out researches and studies and tofavour meetings between public and private opera-tors. Due to numerous and complex requests, theCRESME Research Centre (joint-stock companycontrolled by the Cresme Association) was createdin 1982.

CRESME carries out surveys and analyses regard-ing:

aspects of production and market in the con-structions field;

territorial structures and transformations, withrelative economic, urban and social implications;

administration in public bodies, also by means offeasibility studies of definite solutions and an ac-tive participation to their management;

training of professional profiles within the frame-work of territorial-transformation and facility-management processes.

CRESME is internally specialised in: statistical,

economic, urban, juridical and sociological aspects.These allow interaction between different subject-matters of major interest to the Centre. All this isfacilitated by the extent and variety of the associa-tion (over 150 share holders representing the wholeconstructions field) and of interlocutors that normallyrefer to the CRESME Ricerche S.p.a. During its 40years of activities, CRESME has acquired and de-veloped both a scientific and cultural experience.This guarantees an accurate and correct supply ofinformation, evolution of methods and instrumentsof research.

a constant updating of this resource is madepossible by means of two strategic bearings,which regulate the Centre's activity:

a permanent observation of complexities andchanges in both the construction industry andthe territorial transformations;

the development of scientific and cultural activi-ties where CRESME acts as a connection linkbetween different operators, experiences andsubject-matters which are implied in processesof territorial transformations.

Research studies by thematic area and informationsystems represent the methods and tools across thewhole CRESME research activity.

The CRESME activities are mostly addressed to thefollowing fields of action: Environment and sustainability Structural analysis Territorial analysis Assistance to Public Administrations Current trend and forecast Facility management

Training Strategic marketing Feasibility studies

CRESME has traditionally provided assistance andsupport especially to local administrations andautonomous associations acting as a coordinator.

CRESME RICERCHE SPAViale Gorizia, 25/C

I-00198 RomeItalyphone +39 068 54 36 23fax +39 068 41 57 95

Euroconstruct contact:Antonella [email protected]


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Economisch Instituut voor de BouwnijverheldAmsterdam, Netherlands

[email protected]

Aims and activitiesThe EIB foundation is a leading Dutch economicresearch institute in the field of construction,housing and built environment. Our work aims atfostering, in an independent and scientific way, theknowledge of economic and social questions thatare related to, or that are of importance for theDutch construction industry and the builtenvironment. Research projects are carried out,both on own initiative and in response to outsidedemand, for clients in the private and the publicsectors.

EIB work comprises: market research, mainly in the areas of the vari-

ous construction and real estate markets and re-lated industries;

short term forecasts as well as longer term out-looks, scenario building and research aboutstructural changes in the Dutch construction in-

dustry; scientific analyses of developments in the hous-

ing market to provide the basis for private andsocial housing policies, on a national as well asa regional level;

cost-benefit analyses on built-environmentalissues to facilitate policies of public or other bod-ies;

construction labour market and schooling re-search;

benchmarking of construction firms businessperformance, economic analyses in the field of

construction (process) innovation, procurementpolicies, risk management and corporate strate-gies.

Status and organisationThe EIB institute was founded in 1956 as anindependent, non-profit organisation. A supervisorycouncil, which consists of representatives of theDutch employers organisation, the trade unions inthe construction industry and clients, safeguards theinterests of the institute and the achievement of itsobjectives, but without interfering in the scientific

research itself.

The scientific activities of EIB are concentrated inthree research programmes. The first group focuseson market analysis and housing, in the secondgroup the major emphasis is given to constructioncompanies and innovation, while the third groupconcentrates on research in the field of theconstruction labour market and schooling. The staffmainly consists of economists, statisticians andsociologists and comprises approximately 30persons.

Financial resourcesThe institute is partly financed by contributions fromthe Education and Development fund for theconstruction industry. Other resources come fromfunds for special projects and from contractresearch. A substantial share of these commissionsoriginates from the Dutch government.

EIB - Economisch Instituut voor de

BouwnijverheldPostbus 58248,1040 HE AmsterdamNetherlandsPhone +31 20 583 1900, Fax +31 20 583 1999

[email protected]

Euroconstruct contact:Oebele Vries

[email protected]


21/190

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22/190


PAB-Polish Construction Research & Forecast-ing Warszawa, Poland

[email protected]

PAB POLISH CONSTRUCTION RESEARCH &FORECASTING is a private scientific and researchinstitute specialising in economic analysis of theconstruction industry. PAB was established in 2000by specialists with more than 25 years of experiencein activity within the construction industry.

Basic aims

Permanent scientific research on the field ofinvestment and building processes, the con-struction industry and building market,

Preparation and issuing of reports on scientificresearch initiated by PAB itself as well as on or-ders from firms and different Polish and foreignorganisations.

Activity concentrates on: Industry forecasting: short, medium and long-

term construction and investment forecasts, Workload surveys: permanent surveys of con-

struction activity by branches and regions, Economic analysis: research and reports fo-

cused on the construction industry network, Statistics: preparing database and performing

data researches and analyses Monitoring: real and permanent processes of

searching for changes creation of the construc-tion industry situation

Construction market research: market capacity,its diversification and opportunities for entering.

PAB supplies top professional research andservices on individual orders in the range of: Analysis of demand, supply and competition on

construction and building materials market Cost and price analysis on construction market

and building materials as well Construction and tendering procedure advisory

services,

Research on competition level in the construc-tion and building materials market,

Promotion of small and medium sized firms, i.e.producers and contractors

Monographs reports Construction Monitoring: general and specific

reports on status and changes in construction

activity Business conditions surveys of construction:

analyses of tendencies and development trends short term prognoses

Rankings of construction companies TOP 400Polish Contractors

Polish Construction Key Figures

Journals newsletters for contractors and in-vestors Prognozy Rozwoju Budownictwa -Prognosis of

Construction Development

Polish Construction Surveys Polish Building Materials Industry Surveys Polish Construction Market Review

PAB-Polish Construction Research &Forecastingul. Wsplna 37/39 l.24PL 00-519 WarszawaPoland

phone +48 22 628 88 37fax +48 22 783 38 57, +48 22 629 03 [email protected]

Euroconstruct contact:Mariusz [email protected]


23/190


ITIC Instituto Tcnico para a Indstria da Con-struo

[email protected]

AimsITIC Instituto Tcnico para a Indstria da Con-struo (Technical Institute for the ConstructionIndustry) offers a wide range of services, such asthe development of both technical and scientificactivities in the Construction Industry field in order toimprove economic analysis, technological innova-tion and the management and productivity of con-

struction firms.

StatusITIC is a private and non-profit institute. Its mem-bers are different agents involved in the PortugueseConstruction Industry, such as universities, profes-sional bodies, and construction firms and materialsproducers.

OrganisationITIC structure relies on three main departments:Economic and Management Studies;

Quality Methodologies;Training.

StaffITIC's activities are carried out by a multi-disciplinary team, including economists, engineersand legal advisors.

FundingITIC is partially financed by its members. However,the major part of its funds is raised through contractfees with private firms and public bodies.

ActivitiesITIC undertakes technical and economic studieswithin the Construction sector. Our activities are set

to meet the needs of construction firms throughtechnical support to reinforce management, produc-tivity and quality patterns and therefore issue eco-nomical and technical reports, and ensure the im-plementation of Quality Systems and Methodolo-gies.

We produce estimates and forecasts for the Con-

struction industry based on macroeconomic analysisand field work. ITIC' specialists base their work onaccurate and proven methodologies.

ITIC also aims to establish and reinforce technicaland scientific relationships between Portuguese andforeign entities within the Construction industry.

ITIC organizes national and international confer-ences, seminars, workshops and lectures.

ITIC is prepared to provide a wide range of:

Economic and statistical analysis; Construction Industry forecasting; Construction Market analysis.

ITIC Instituto Tcnico para a Indstria daConstruoPraa de Alvalade, 6, 6Frt1700 036 LisbonPortugal

Euroconstruct [email protected] +351 21 351 58 81fax +351 21 351 58 89


24/190


EOS Komercia, a.s.Bratislava, Slovakia

[email protected]

PROFILE OF THE COMPANYEOS Komercia, a.s. (Joint-stock company) is aprivate research and consultancy company, estab-lished in 1992 by transformation of former stavekonomiky a organizcie stavebnctva, Bratislava(Institute of Building Economics and Organisation)founded in 1963.

At present, EOS Komercia, a.s. has 21 employ-ees. Research, advisory and consultancy servicesare performed by approx. 17 experts. In addition wehave been working with a circle of external co-operators, university experts and other specialists,who participate on solutions of important tasks andprojects.

Basic fields of company activities are as follows: applied economical research and development, business and economic consulting, monitoring and field survey,

solving of problems of construction market, thereviving, forming of sectoral, regional politics ofconstruction, international comparisons; habita-tion and housing construction, regional devel-opment, etc.,

marketing research of construction market, preparation of legislative standards in sphere of

housing and public works, evaluation of property and real estate, public procurement, engineering activity - supply activity in construc-

tion,

technical assistance - EU funds, production and development of economic and

calculation software, organisation of training courses, seminars and

further other special undertakings, Commercial, intermediate and publishing activ-

ity.

EOS Komercia, a.s. solves scientific-technological projects and state projects, elaboratesanalytic, comparative and prognostic studies andfurther outputs, focused on development of selectedareas of economy of Slovakia, inclusive creation ofpurpose oriented information systems and providingof statistic documents and indicators. The companyalso participates on creation of laws and other legis-

lative standards; elaborates financial analysis andbusiness plans of companies; elaborates restructur-ing projects of the companies; elaborates studies,associated with strategic development of the com-panies.

EOS Komercia, a.s. also executes evaluation ofproperty and real estates in various processes andcredit - awarding; deals with problems of publicprocurement and with creation of classification sys-tem of sorting of building production; elaboratesprofessional publications and statistic materials

concerning creation of branch economies.

EOS Komercia, a.s.,Ruov dolina 27 (vchod Mliekrensk ul.)824 69 Bratislava 26Slovakiaphone +421 2 5810 0510fax +421 2 5810 [email protected]

Euroconstruct [email protected] +421 2 58100510 / 5810 0526 / 5810 0531fax +421 2 5810 0500


25/190


Institut de Technologia de la Construcci deCatalunya

[email protected]

The Catalonia Institute of Construction Technology,ITeC, is an independent non-profitmaking organisa-tion that carries out its work in the area of opera-tions intended to further the progress of Construc-tion.

ITeC is structured into Areas, Research Programmeand Services. The Constructive Process Area workson the creation of information, methodology andtools (software), which are applicable to the execu-tion and management of each constructive processphase.

The Quality Area promotes, evaluates and endorsesquality. Activities include ensuring quality in compa-nies, the evaluation of technical specifications andproduct certification. This area includes activitiesrelated to Economic Construction Analysis.

Maintenance and Rehabilitation Area producesinformation, methodology and tools (software), for

the planning and management of maintenance andfor rehabilitation analysis and intervention.

The Research Programme is the infrastructure forresearch projects development. The following re-search lines are open: Environment and Construction Construction and New Requirements Existing Construction

The ITeC staff is made up of a multidisciplinaryteam of 100 persons.

Institut de Technologia de la Construcci deCatalunyaWellington 19E-08018 BarcelonaSpainphone +34 933 09 34 04fax +34 933 00 48 [email protected]

Euroconstruct [email protected]


26/190


KOF Swiss Economic Institute

[email protected]

Field of activitiesKOF analyses the development of the Swiss econ-omy from a shorter-term perspective (economicanalyses and forecasts) against the backdrop oflonger-term developmental trends (growth andstructural change). The research projects, productsand services provided by the KOF cover a broadspectrum of topics.

Regular surveys (in the form of business, invest-

ment and innovation tendency surveys) guaranteean up-to-date, comprehensive information systemfor the short- and medium-term analysis of theoverall economy, for individual branches of industry,for the construction sector and for cantonal/regionalstudies. The main activities of the KOF (analysisand prognostics of the Swiss economy, search forleading indicators, research on political economicquestions) are therefore based on the businesstendency survey results. Constant research basedon modern empirical methods (econometric modelsfor the overall economy and for separate branches

of industry, time series analyses) assures that qual-ity is maintained in the analysis and forecasting ofcyclical developments and structural change.

At an international level, the institute works togetherwith authoritative organisations like the OECD andthe IMF. KOF is an active member of various inter-national academic and research associations(CIRET, AIECE, Euroconstruct). Since 2000, theCIRET office has been run at KOF.

StatusThe Swiss Economic Institute is an institute of theSwiss Federal Institute of Technology (ETH), and assuch an independent body.

OrganisationKOF currently employs more than 30 researchers.Some of them also lecture at the ETH and at theZurich University. The institute is structured in thefollowing three research divisions: Business Cycle

Research; International Economics; StructuralChange.

KOF Swiss Economic InstituteETH ZurichWEH D 4Weinbergstrasse 358092 ZurichSwitzerlandphone +41 44 632 42 39fax +41 44 632 12 18

[email protected]

Euroconstruct contactYngve [email protected] +41 44 632 53 23fax +41 44 632 12 18


27/190


Construction Futures, Economics MarketingInformation Services, Experian plc.

[email protected]://economics.experian.co.uk

Construction Futures has for more than a decadefocused on economic analysis of the constructionand related industries. Construction Futures is partof the economics team at Experian plc, one of theUK's leading economic consultancies.

Construction Futures works with clients in the pri-vate and public sectors, providing a better under-standing of the industry in the context of the widereconomic environment. We have a thorough and

detailed knowledge of the factors that influence thevarious markets, types of work in the sector and itsoperational aspects. Our major strength lies in thelocation and analysis of construction related infor-mation to support clients need for insight on pasttrends and forecasts of future developments. Wehave a portfolio of well-known and respected publi-cations, including the industry-standard nationalconstruction forecasts and the Foresight regionalforecasts. We also collaborate with our fellow Euro-construct members to produce compatible forecastsfor nineteen European countries on a six monthly

basis. Our survey unit carries out a detailedmonthly state of trade of survey in the UK for theEuropean Commission.

Our work falls into the following categories: Industry forecasting: short, medium and long-

term construction forecasts, on a national andbroad regional basis.

Workload surveys: regular surveys of construc-tion activity, professional services, and industrystructure.

Market research: the use and provision of all

relevant information to help clients assess mar-ket size, structure, competition and opportunitiesfor entry or diversification.

Economic analysis: research and reports on anyaspects or sectors of the construction industrychain.

Statistics: data search, analysis and advice onthe use and relevance to clients of macro eco-nomic and construction industry statistics.

Corporate research: company finance, profitabil-ity and future outlook.

International comparisons: specifically of Euro-pean construction markets.

Seminars: presentations and lectures relating toany of the above areas.

Experians Market Information Services divisionprovides an understanding of individuals, marketsand economies in the UK and around the world. Wehave an international team of researchers, analystsand consultants, generating insight and advice on awide range of marketing, public policy and businessissues.

Our work is rooted in three fundamental areas:Individuals: we have exhaustive information on,

and insight into, the demographic and socio-economic circumstances of individual consumers inevery market that we research. We have over 30years experience in consumer segmentation andhave built more consumer classification systemsthan any other organisation, globally.

Markets: we have a detailed understanding of mar-kets defined geographically, by product and byconsumer or business type, which we use to helpour clients benchmark and maximise their perform-ance.

Economies: we model the current position andfuture prospects of local, national and globaleconomies in terms of employment, output, con-sumer spending, investment, property and assetmarkets. We advise companies on which econo-mies to operate in, and public policy makers on howto improve economic performance and raise socialinclusion.

Construction Forecasting and Research

Experian's Business Strategies Division, 6th floorCardinal Place,80 Victoria Street,London SW1E 5JLUnited Kingdomphone +44 20 7746 8263fax +44 20 7746 8277

[email protected]

Euroconstruct contactJames Hasting

[email protected]


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Kenneth WattretChief Eurozone Economist

BNP Paribas, UK

THE EUROPEANMACROECONOMIC

OUTLOOK



29/190


Europe: Headwinds Blowing

The headwinds to economic growth acrossEurope remain considerable.

The need for fiscal consolidation, and stress in

the banking sector, are of particular concern. Domestic demand has been, and will remain,

relatively lacklustre in the eurozone. Unemployment will stay high, suppressing

household income and spending growth. Businesses will be cautious on investment and

hiring given high uncertainty, low capacity utili-sation and tight credit conditions.

Post-crisis, the stimulus to growth has beenprimarily through the external channel.

Strong demand from Asia has been pivotal tothe recent upturn in exports.

Germany especially has been benefiting andshould continue to outperform. The periphery of the eurozone could face a

prolonged, depression-style slump. The EUR exchange rate will weaken but the

growth boost near-term will be modest. Monetary policy will stay stimulatory but the

transmission mechanism is impaired.

The global backdropSince our Global Outlook was published back in Q1,activity data at the global level have generally been

stronger than we had expected (and not just in thedeveloping markets). However, worries aboutfuture growth have increased. Most of this relates tothe eurozone debt crisis but sentiment data,including purchasing managers indices in severalcountries (including, crucially, China) have softened,as have some of the US regional PMIs.

In terms of global growth for 2010, we have nudgedthis up from 4.3% to 4.5% between our last forecastand now, leaving 2011 growth at 3.8%. The biggestchange has been an upward revision in Japans

2010 growth from 2.2% to 3.6%, largely reflectingthe Q1 outcome. US growth has been edged up in2010 from 2.8% to 3.0%, with a similar revision in2011. Were it not for recent eurozone events, 2011US growth would have been revised up by more.

Chart 1: German Exports & World Trade

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10-20

-15

-10

-5

0

5

10

15

20

-25

-20

-15

-10

-5

0

5

10

15

20

25CPB World Trade

(% y/y, RHS)

Extra-EurozoneExports (% y/y)

Source: Reuters EcoWin Pro

Chinese policy tightening seems to be biting harderthan initially expected and we have revised our2010 growth forecast down to 9.8% from 10.5%, butwith 2011 unchanged at 8.4%. We continue to seerobust growth in the rest of Asia.

Uncertainty about the financial crisis and its effectsis high. Thus far, attempts to stop confidenceleaking away have been about as successful assimilar operations to cap the Gulf oil leak.

The eurozone crisisIn terms of how the sovereign debt crisis developsfrom here, we reject the notion that it will quickly goaway the problems in fiscal accounts and bankingare chronic, not ephemeral, with acute symptomsfrom time to time.

Unless there is decisive and pre-emptive officialpolicy action (which we urge on the authorities butare doubtful of seeing), thin summer markets couldbe testing.

Given the reactive nature of policy in the eurozone,

things may need to get worse before they get better.This indeed is our central scenario. We see use ofthe IMF/eurozone fund as very likely and expect the

2008 2009 2010 (1) 2011 (1) 2012 (1)

World (2) 3.2 -0.6 4.5 3.8 4.2

G7 0.1 -3.4 2.6 2.2 2.5

US 0.4 -2.4 3.0 2.8 3.2

Japan -1.2 -5.2 3.6 2.3 1.8

Eurozone 0.4 -4.1 1.2 0.6 1.0

China 9.6 8.7 9.8 8.4 9.0

Other Advanced (2) 1.3 -1.4 2.8 2.6 3.1

Asia Ex-Japan (2) 7.2 5.9 8.9 7.6 8.0CEE & Russia (2) 5.1 -5.8 3.4 3.1 3.8Latin America (2) 4.0 -1.9 5.4 3.8 3.9

Table 1: GDP (% y/y)

(1) Forecasts (2) BNP Paribas estimates based on weights calculated

using the PPP valuation of country GDP in IMF WEO April 2010

Source: BNP Paribas


30/190

29 Macroeconomic Outlook

ECB to have to broaden and deepen its purchasesof government debt.

Thus, we expect a widening of bond spreadsrelative to Germany and a rally in bunds, takingyields at the 10-year maturity down to just 2.0%.

Flight-to-quality considerations are also likely tobenefit the Treasury market in the US.

As in our last forecast round, we expect continuedeurozone stress to undermine the EUR: we expectparity in EUR/USD by Q1 2011.

Since our central scenario is not for an EMUmeltdown, the knock-on effects on other regions which will mainly come from confidence andfinancial market transmission channels should berelatively limited. However, if a vicious feedbackloop between the real, banking and governmentsectors develops in the eurozone, the impactelsewhere could be considerably bigger.

Low inflation, low ratesOn inflation, we continue to see downwardpressures in core inflation in the US and Europenext year, taking us close to zero core inflation(headline should be about 1% due to higher oilprices). Inflationary risks are concentrated indeveloping markets.

We believe there is a low risk of importing inflationfrom over-heating economies in Asia. Much moreimportant for inflation in the US and Europe will bethe impact of spare capacity and highunemployment on domestic price pressures, a viewshared by the Fed, the ECB and the Bank ofEngland.

With tighter fiscal policy in the eurozone and morefinancial risks globally, monetary policy will beeasier than we previously expected. In addition tomore asset purchases from the ECB, we now

expect no interest hikes from the Fed, ECB or BoJuntil 2012.

Until financial markets are becalmed, an exit fromunconventional policies is off the agenda, with thelikelihood of more (as in the eurozone and UK)outweighing the probability of less. In the US, theresponse of inflation expectations to falling coreinflation will be the key to whether or not the Fedreaches for unconventional weapons.

Eurozone ups and downsWe expect growth in the immediate period ahead tobe comparatively strong. The average q/q increasein GDP since the eurozone came out of recessionhas been just 0.2%.

Chart 2: Eurozone Manufacturing PMI

97 98 99 00 01 02 03 04 05 06 07 08 09 1030

35

40

45

50

55

60

0.5

0.6

0.7

0.8

0.9

0.9

1.1

1.2

1.3

1.4 Manufacturing PMI:Ratio of New Orders to Stocks of Finished Goods

Manufacturing PMI: Headline


Chart 3: Eurozone Consumer Sentiment

86 88 90 92 94 96 98 00 02 04 06 08 10-50

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

5

-28

-25

-23

-20

-18

-15

-13

-10

Mid-1990s'Soft Patch'

EC Consumer Survey:Economic Outlook (RHS)

EC Consumer Survey:Spending Intentions


For Q2 this year we assume there will be a 0.6% q/qrise, with Germany expanding by more than 1% q/q.In part, this strength is driven by a reversal of thecold weather effects which dampened activity in theconstruction sector in particular. Beyond Q2 we see

the eurozone economy losing momentum, linked tothe tightening of fiscal policy which is going to bevery pronounced in some of the peripheral countries

2009 2010 2011 2012 2010

Q1 Q2 Q3 Q4

US

GDP -2.4 3.0 2.8 3.2 2.5 3.4 3.4 2.7

CPI -0.3 1.7 1.0 1.0 2.4 1.8 1.4 1.2

Core CPI 1.7 0.8 0.0 0.5 1.3 0.9 0.7 0.2

Eurozone

GDP -4.1 1.2 0.6 1.0 0.6 1.4 1.3 1.4

CPI 0.3 1.6 1.4 0.7 1.1 1.5 1.8 2.1

Core CPI 1.4 0.8 0.0 0.2 0.9 0.8 0.7 0.6

Japan

GDP -5.2 3.6 2.3 1.8 4.6 3.0 3.7 3.2

CPI -1.4 -0.8 -0.3 0.5 -1.2 -1.0 -0.9 -0.2

US-Like Core CPI -0.7 -1.2 -0.4 0.4 -1.2 -1.4 -1.2 -1.0

UK

GDP -4.9 1.4 0.9 1.3 -0.1 1.3 2.2 2.1

HICP 2.2 3.2 1.7 1.6 3.3 3.4 3.0 2.9

Core CPI 1.8 2.7 0.8 1.0 3.0 2.9 2.6 2.1

* Preliminary, to be confirmed in the Global Outlook

Source: BNP Paribas

Economic Forecasts (% y/y)


31/190


but which will also be significant in some corecountries including Germany and France.We believe that the German governments decisionto lead by example with tighter fiscal policy is astrategic error. Germany should, given its relativelyrobust fiscal position and current account surplus,

be doing more to boost its domestic demand tooffset the policy tightening in the periphery. But whatwe believe policy ought to be, and what it actually is,are two different things.

We already see leading indicators losing groundand we expect this to continue in the comingmonths. By Q4 this year and in the first half of nextyear we have factored into our central scenario forthe eurozone a minimal rate of GDP growth. Welook for the growth rate on a q/q basis to bottom outat around zero in Q2 2011 and our forecast for theannual growth rate in 2011 overall is just 0.6%.

This compares unfavourably to the current marketconsensus expectation of around 1.5% which is inline with current European Commission estimate.We note that the ECB recently cut its estimate for2011 to 1.2% from 1.5% as part of the Eurosystemtwice yearly review. This only incorporates part ofthe fiscal tightening which will eventually bedelivered as the ECB only counts measuresapproved by national parliaments already.

Domestic doldrumsThe key issue for our assessment of the eurozoneeconomy is the absence of any domestic demanddynamics, something which the ECB, to give itcredit, has also been assuming in its projections.

Consumer spending will be held back by continuedweakness in the labour market as the economy isstill adjusting to the prior output shock. In six of thelast eight quarters private consumption has fallen ona q/q basis. Surveys of purchasing intentions arenear record lows still despite the pick up in activity.Even in the good times, consumption growth hasbeen a disappointment in the eurozone. These arefar from good times, especially in peripheralcountries.

Businesses, meanwhile, are unlikely to take up thereins. The financial situation in the corporate sectoris nowhere near as encouraging as in the US, linkedto the slower adjustment of the labour market to thepost-Lehman plunge in output levels. With capacityutilisation rates still low, and uncertainty high, we

expect only a limited rebound from the investmentside. Small businesses access to credit will remainimpaired by problems in the banking sector whichwe also impact adversely on investment.

Excesses in some national economies constructionshares in GDP will also have to be worked off, withSpain a particular concern in this regard.

Chart 4: Share of Residential Investment inGDP

80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 102

3

4

5

6

7

8

9

10Spain

US


Chart 5: Swedish Housing Market

03 04 05 06 07 08 09 10-5.

-2.

0.

2.

5.

7.

10.

12.

15.

7

8

9

10

11

12

13

14

Total Lending toHousehold Sector (% y/y)

House Prices (% y/y, RHS)


Spot** Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q4 '12

US

Fed Funds 0.25 0.25 0.25 0.25 0.25 0.2510-year 3.23 2.90 3.00 3.10 3.25 3.75

Eurozone

Refi 1.00 1.00 1.00 1.00 1.00 1.00

10-year 2.77 2.20 2.00 2.10 2.25 3.00

Japan

Call Rate 0.10 0.10 0.10 0.10 0.10 0.10

10-year 1.23 1.30 1.40 1.50 1.60 1.80

UK

Base Rate 0.50 0.50 0.50 0.50 0.50 2.50

10-year 3.50 3.00 2.80 2.85 3.00 3.75

Source: BNP Paribas * End Period **Rates as at 21 Jun

* Preliminary, to be confirmed in the Global Outlook

Interest Rate Forecasts (%)*

Spot** Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q4 '12

EUR/USD 1.23 1.16 1.08 1.00 0.98 1.00

USD/JPY 91 92 94 100 105 118GBP/USD 1.48 1.43 1.35 1.28 1.26 1.27

Source: BNP Paribas. End Period, Spot Rates as at 21 Jun

FX Forecasts*


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Germany to outperformWe expect significant divergence in growth rates atthe national level in the eurozone (and in other partsof Europe). Germany is likely to outperform growthwise this year and next, linked to robust exports.

The difficulties in the periphery of the eurozone arenot helpful for Germanys export prospects but thisis only part of the story. More than half of Germanexports go to countries outside the eurozone.

The share of German exports accounted for by theBRIC economies has been steadily increasing overthe past decade and is now well above that for theUS. The share of German exports going to Chinaalone, at around 5%, is not far short of that for theUS. As long as demand in Asia holds up, this shouldpartly offset the inevitable damage to intra-eurozone

demand caused by the debt crisis. China has beenthe principal contributor to German export growth inthe recent period.

Recent manufacturing orders data in Germany wereremarkably strong. Orders rose by almost 3% m/min April following a 5% m/m increase in March andare up by around 14% since the turn of the year.Given the typical lags, the surge in orders recentlypoints to further strength in production in the periodahead.

Even if German industrial production is unchangedin May and June, which is a pessimistic assumptionon the basis of the prior strength in leadingindicators such as the manufacturing PMI, the q/qincrease in output in Q2 would be not far short of4%, the biggest in the history of the series. The y/yrate of increase in industrial production in Germanyrocketed to more than 13% in April, by far thehighest growth rate in the series history.

The y/y rates of change are, however, misleading asthey are distorted by base effects related to theexceptional weakness in manufacturing activity ayear previously in the wake of the financial crisis.Note that the levels of output and orders inGermany are still way down on their pre-crisis peaks

by 17% and 13%, respectively a reminder tolook beyond the rates of change and consider levelsalso.

The strong rebound in the construction sector aftera weather-hit Q1 is another boost to growthprospects for Q2. Output in the construction sector

rose by a staggering 24% m/m in March, its biggestever increase by far, and then expanded by afurther 2.6% m/m in April. Assuming unchangedconstruction output in the remaining months of Q2,

the q/q rise would be around 8%! Germany has theadvantage of not suffering from the bursting of aproperty bubble unlike some of its EMU neighbours.This is helping to support its labour market also.

Still, even leading indicators in Germany are starting

to lose momentum, including the more reliable onessuch as the PMI. The decline in the manufacturingPMIs output sub-index in May was exceptional big:at almost eight percentage points it was the secondbiggest on record.

Given the recent turmoil in markets and theprospect of more fiscal tightening, including inGermany, the survey data are likely to continue tolose ground in coming months.

The problem for the German economy, and the restof the eurozone as a consequence, is the lack ofinternal demand. Domestic final demand, i.e. withinventories excluded, has declined in six of the pasteight quarters. Exports rose by over 7% y/y in Q1but domestic final demand dropped by 0.7% on thesame basis, the fifth consecutive contraction. Evenin the good times, there has been precious littleconsumer demand growth in Germany. From Q42005 to Q1 2008, German GDP rose by acumulative 8% in real terms. Over the same period,exports rose by over 20%. Private consumption rose

by a negligible 1%.Mixed pictureBeyond Germany the picture varies considerably indifferent countries. For EMU member statessuffering from an evaporation of confidence in theirsolvency, the period ahead will be very challenging.Budgetary austerity is going to hit very hard andcountries like Greece, Portugal and Spain could findthemselves in a prolonged period of outputcontraction, following the path already seen inIreland.

Competitiveness is poor and will have to be wonback the hard way within the monetary union: i.e.via an adjustment of real exchange rates throughlower relative costs and prices. For economies withhigh levels of public or private sector debt, this runsthe risk of a debt-deflation trap. Social opposition tothe austerity programmes has been limited to datebut is likely to rise as unemployment continues toincrease and there is no sign of light at the end ofwhat looks like being a very long, dark tunnel. Thegood news is that policy rates will stay low for an

extended period but the transmission mechanism isbeing hampered by problems in the banking system.


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The UK has been a safe haven amid the eurozonestorm but its government is well aware that it toohas a huge fiscal challenge to deal with. Theemergency budget contains a painful mix ofexpenditure cuts and tax increases which willsquash the recovery: we see lower GDP growth in

2011 than 2010 and as with the eurozone, webelieve forecasters are too complacent over theadverse impact of tighter fiscal policy.

Bright spots include Switzerland and Sweden wheregrowth rates have picked up markedly and are not aresult solely of export strength. The key risk forSwitzerland is via an excessive exchange rate riseamid uncertainty over EMU. In Sweden, the risk isfor a housing market bubble to emerge as policy

rates are near zero despite strong internal demand,with lending growth very robust.


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DKM Economic ConsultantsDublin, Ireland

[email protected]

THE EUROPEANMACROECONOMIC

OUTLOOK

Statistical Appendix



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Population (in 000s)

Estimate Outlook

Country 2006 2007 2008 2009 2010 2011 2012

Austria 8 282 8 325 8 337 8 369 8 397 8 427 8 462

Belgium 10 548 10 626 10 704 10 779 10 856 10 934 11 013

Denmark 5 427 5 447 5 476 5 511 5 535 5 550 5 565Finland 5 277 5 300 5 326 5 351 5 375 5 400 5 425

France 61 400 61 796 62 131 62 469 62 810 63 258 63 701

Germany 82 315 82 218 82 002 81 800 81 700 81 600 81 500

Ireland 4 240 4 339 4 422 4 459 4 439 4 434 4 449

Italy 59 131 59 619 60 045 60 330 60 591 60 830 61 047

Norway 4 640 4 681 4 737 4 799 4 858 4 910 4 960

Portugal 10 586 10 604 10 623 10 638 10 661 10 683 10 706

Spain 43 758 44 475 45 283 45 828 45 990 46 225 46 480

Sweden 9 113 9 183 9 256 9 341 9 422 9 499 9 570

Switzerland 7 558 7 619 7 711 7 811 7 913 8 016 8 120

The Netherlands 16 358 16 405 16 487 16 578 16 631 16 684 16 731

United Kingdom 60 587 60 975 61 393 61 794 62 222 62 649 63 074

Western Europe (EC-15) 389 220 391 611 393 933 395 857 397 400 399 099 400 803Czech Republic 10 267 10 326 10 468 10 506 10 510 10 520 10 525

Hungary 10 077 10 066 10 045 10 031 10 013 9 995 9 985

Poland 38 125 38 116 38 136 38 101 38 092 38 081 38 069

Slovak Republic 5 391 5 398 5 407 5 419 5 428 5 437 5 446

Eastern Europe (EC-4) 63 860 63 906 64 056 64 057 64 043 64 033 64 025

Euroconstruct Countries (EC-19) 453 080 455 517 457 989 459 914 461 443 463 132 464 828

Source: Euroconstruct, June 2010

Forecasts

Households (in 000s)

Estimate Outlook

Country 2006 2007 2008 2009 2010 2011 2012

Austria 3 513 3 543 3 569 3 595 3 621 3 647 3 676Belgium 4 443 4 492 4 541 4 590 4 640 4 691 4 742

Denmark 2 516 2 532 2 547 2 564 2 573 2 585 2 600

Finland 2 454 2 476 2 500 2 520 2 540 2 560 2 580

France 26 069 26 374 26 665 26 960 27 240 27 508 27 765

Germany 39 451 39 595 39 720 39 900 40 000 40 100 40 200

Ireland 1 503 1 550 1 585 1 604 1 603 1 607 1 618

Italy 23 612 23 910 23 982 24 209 24 409 24 597 24 767

Norway 2 021 2 037 2 065 2 105 2 143 2 175 2 215

Portugal 3 937 3 998 4 060 4 124 4 189 4 256 4 323

Spain 16 100 16 500 16 800 17 100 17 200 17 350 17 550

Sweden 4 368 4 398 4 421 4 440 4 464 4 490 4 522

Switzerland 3 368 3 403 3 443 3 482 3 515 3 550 3 588

The Netherlands 7 191 7 242 7 313 7 417 7 474 7 532 7 588

United Kingdom 25 751 26 043 26 334 26 626 26 917 27 209 27 524

Western Europe (EC-15) 166 298 168 092 169 544 171 235 172 528 173 857 175 258

Czech Republic 4 139 4 184 4 216 4 241 4 256 4 271 4 284

Hungary 3 811 3 810 3 820 3 825 3 825 3 830 3 830

Poland 13 700 13 805 13 920 14 000 14 100 14 175 14 260

Slovak Republic 2 093 2 098 2 104 2 109 2 114 2 120 2 126




Forecasts


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Unemployed (in 000s)

Estimate Outlook

Country 2006 2007 2008 2009 2010 2011 2012

Austria 239 222 212 260 270 282 288

Belgium 422 382 360 408 451 485 490

Denmark 109 78 52 97 125 125 125Finland 205 183 172 221 250 250 245

France 2 437 2 223 2 071 2 576 2 841 2 891 2 833

Germany 4 487 3 777 3 268 3 423 3 382 3 313 3 250

Ireland 94 108 180 282 286 285 275

Italy 1 671 1 524 1 692 1 945 2 127 2 356 2 250

Norway 86 65 69 86 95 105 107

Portugal 428 449 427 529 620 622 580

Spain 1 811 1 928 3 208 4 327 4 700 4 550 4 275

Sweden 330 292 294 401 440 439 408

Switzerland 132 109 102 146 161 148 136

The Netherlands 413 344 304 379 500 500 482

United Kingdom 1 671 1 652 1 781 2 395 2 574 2 497 2 190

Western Europe (EC-15) 14 533 13 335 14 191 17 473 18 821 18 847 17 933Czech Republic 371 276 230 357 430 410 397

Hungary 317 312 329 421 450 420 380

Poland 2 309 1 747 1 474 1 790 1 990 1 995 1 825

Slovak Republic 353 292 258 324 346 330 314




Forecasts

Unemployment Rate (in %)

Estimate Outlook

Country 2006 2007 2008 2009 2010 2011 2012

Austria 4.8 4.4 3.8 5.0 5.2 5.4 5.7Belgium 8.3 7.5 7.0 7.9 8.7 9.3 9.3

Denmark 3.9 2.8 1.8 3.4 4.5 4.5 4.5

Finland 7.7 6.9 6.4 8.2 9.5 9.5 9.2

France 8.8 8.0 7.4 9.1 10.0 10.2 9.9

Germany 10.3 8.7 7.5 7.9 7.8 7.6 7.5

Ireland 4.3 4.8 8.1 13.1 13.6 13.5 12.9

Italy 6.8 6.2 6.8 7.8 8.5 9.4 9.0

Norway 3.4 2.5 2.6 3.2 3.5 3.9 3.9

Portugal 7.7 8.0 7.6 9.5 11.1 11.1 10.4

Spain 8.3 8.6 13.9 18.8 19.8 19.5 17.8

Sweden 7.1 6.2 6.1 8.4 9.1 9.1 8.4

Switzerland 3.3 2.8 2.6 3.7 4.1 3.7 3.4

The Netherlands 5.5 4.5 3.9 4.9 6.5 6.5 6.3

United Kingdom 5.4 5.4 5.7 7.6 8.2 8.0 7.0

Czech Republic 7.1 5.3 4.4 6.7 8.7 8.6 8.4

Hungary 7.5 7.4 7.8 10.0 10.7 10.0 9.0

Poland 13.8 9.6 7.1 8.2 9.3 9.3 8.7

Slovak Republic 13.3 11.0 9.6 12.1 12.9 12.3 11.7


Forecasts


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Consumer prices (% change)

Estimate Outlook

Country 2006 2007 2008 2009 2010 2011 2012

Austria 1.5 2.2 3.2 0.5 1.4 1.8 1.7

Belgium 1.8 1.8 4.5 -0.1 1.8 1.7 1.6

Denmark 1.9 1.7 3.6 1.1 2.5 2.0 2.0Finland 1.6 2.5 4.1 0.0 1.0 2.0 2.0

France 1.7 1.5 2.8 0.1 1.9 2.1 2.3

Germany 1.6 2.3 2.6 0.4 0.9 1.0 2.0

Ireland 4.0 4.9 4.1 -4.5 -1.0 2.0 3.0

Italy 2.1 1.8 3.3 0.8 1.5 2.1 2.2

Norway 2.3 0.8 3.8 2.1 1.7 1.3 2.0

Portugal 3.1 2.5 2.6 -0.8 0.9 1.0 1.3

Spain 3.5 2.8 4.1 -0.3 1.5 1.6 2.0

Sweden 1.4 2.2 3.4 -0.3 1.0 1.6 2.4

Switzerland 1.1 0.7 2.4 -0.5 0.9 1.0 0.8

The Netherlands 1.1 1.6 2.5 1.2 1.3 1.5 1.5

United Kingdom 2.3 2.3 3.6 2.2 2.8 1.7 1.9

Czech Republic 2.4 2.8 6.3 1.0 1.0 1.2 2.0Hungary 3.9 8.0 6.1 4.2 4.3 2.5 3.0

Poland 1.1 2.0 4.2 3.3 1.8 2.2 2.5

Slovak Republic 4.5 2.8 4.6 1.6 2.1 3.7 3.9


Forecasts

Construction prices (% change)

Estimate Outlook

Country 2006 2007 2008 2009 2010 2011 2012

Austria 2.7 3.8 5.0 3.3 3.0 2.8 2.5

Belgium 3.3 1.4 5.3 -2.4 2.6 1.9 1.7

Denmark 4.7 6.4 2.7 -0.3 -2.0 0.0 0.0

Finland 3.8 5.9 3.9 -1.0 0.0 1.0 3.0

France 7.0 4.0 7.7 -2.7 1.5 2.5 3.5

Germany 1.9 6.7 2.9 0.8 1.5 2.0 2.5

Ireland 6.2 1.3 -9.9 -16.3 -6.3 0.0 2.5

Italy 3.5 3.6 3.7 0.9 0.4 3.1 3.4

Norway 5.7 7.7 5.7 2.3 3.0 2.5 3.4

Portugal 4.4 3.3 5.8

Documents

Euroconstruct June 2010