Europe Construction Market Report 1Q 2024
Italy
Local economic indicators
Gross domestic product (GDP)
According to the Italian National Institute of Statistics (Istat), the country witnessed a modest year-on-year (YoY) GDP growth of 0.5% in the 4Q 2023, along with 0.2% growth compared to the preceding period, 3Q 2023.
The gross value added (GVA) figures (chain-linked; seasonally adjusted) showed that construction grew 0.9% over the previous quarter and +1.4% YoY. In 3Q 2023, construction accounted for 4.6% overall GDP.
Furthermore, the Organisation for Economic Co-operation and Development (OECD) upheld its GDP forecast, projecting a growth rate of 0.7% for both 2023 and 2024.
Inflation
Per the most recent figures from Istat's January flash report, inflation at the local level climbed by 0.3% when compared to December 2023 and recorded a 0.6% and 0.8% rise YoY in December and January, respectively.
Similarly, Eurostat’s Harmonised Index of Consumer Prices (HICP) validated these findings, recording a 0.5% YoY inflation rate in December, which increased to 0.9% in January. Concurrently, the OECD has maintained its inflation forecasts at 6.1% and 2.6% for 2023 and 2024, respectively.
Construction materials
The latest data from Istat's local construction cost index indicates ongoing price recovery in residential and industrial construction, with YoY decreases in December of 0.57% and 3.47%, respectively.
This trend is depicted in the table below, sourced from Eurostat's local industrial producer price index, showcasing widespread month-over-month (MoM) and YoY price recoveries, with significant declines in MoM HVAC (-5.8%) and YoY electrical distribution (-42.6%).
Refer to the table for detailed MoM, YoY and indexed pricing inflation.
Market outlook
In January, the construction confidence indicator dipped to 5.5 from its December level of 6.9, mainly due to a decrease in order books. from 5.9 to 1.7. This fall, however, was mitigated somewhat by a 1.5-point rise in employment expectations from 7.8 in December to 9.3 in January. Although there were signs of improvement in labour shortages from 26.1 in December to 23.4 in January, these shortages persist as the primary factor constraining building activity. More positively, the reported figure for material shortages fell to 11.7 from 15.9 — the lowest figure since October 2021, when it was 10.8.
In terms of sector activity, data centres continue to drive growth within the construction industry. The country’s data centre mega wattage (MW) surged from 80MW in 2022 to an impressive 430MW in 2023, with an additional 83 assets slated for completion by 2024 and 2025.
Meanwhile, Italy experienced a significant upswing in its hospitality sector during the previous quarter thanks to government incentives facilitating developers to acquire and revamp existing assets more cost-effectively.
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. Undertaking risk analysis studies enables better evaluation and preparation of appropriate contingencies for your particular project conditions and risk exposure.
