Central Europe Construction Market Report 3Q 2023
Czechia
Local economic indicators
The Organisation for Economic Co-operation and Development (OECD) reports that Czechia produced no gross domestic product (GDP) growth in the first quarter of 2023, compared to the previous period, due to decreased private spending (-2.7%). The OECD’s recent Economic Outlook, published in June 2023, maintains a low forecasted annual growth rate for the year at 0.3% and cites elevated inflation as the driver to decreasing private consumption.
The most recent data available on the Czech Statistical Office website shows inflation at 9.7% in June, the fifth consecutive month to produce declining rates since January’s peak at 17.5%. The Eurostat Harmonised Index of Consumer Prices (HICP) has produced similar results with a peak in January (19.1%) and steady decline to June’s 11.2%. The OECD forecasts inflation to continue lowering in the second half of the year, reaching 10% by year’s end.
Construction materials
The construction work price index, as reported by the Czech Statistical Office in May 2023, shows a continuing trend of stabilised inflation month-over-month (MoM) throughout the year, at less than 1% every period, a welcomed change from the previous year’s average of 1% increases every period.
Since January, Czechia has seen declining industrial producer prices in wood, clay building materials, HVAC and electrical distribution, all of which saw steady increases between July 2022 to its peak in February 2023.
Contracts
As mentioned in our previous quarterly report, the growing trend of including advanced payments in smaller, speciality contracts has now extended to large construction companies looking to ease the strain of high financing rates. Generally, Gleeds recommends that fair and balanced contracts are sought to prevent or eliminate potential risk and future extra costs.
Market outlook
While the construction confidence indicator remains very low, material and equipment availability are a diminishing concern, having improved 7.7 points since January of this year and nearly 28 points since its most recent peak in May 2022. Surveyed contractors are forecasting both decreased demand and price increase expectations as the most influential challenges over the next three months. The sector is craving work and will likely be very competitive.
Across the Czechian construction market, sustainability is a hot topic. ESG, EU taxonomy, BREEAM and WELL requirements are frequently implemented in projects during the preparation phase (although in some cases, in later stages of the project or even during the realisation phase).
As always, Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact project programmes and costs. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure.
VŠCHT University of Chemistry and Technology, Prague, Czech Republic — Gleeds Quality Management, Quality Inspections, Technical Due Diligence services.
