Western Mainland Europe Construction Market Report 3Q 2023
Italy
Local economic indicators
The Italian National Institute of Statistics (Istat) reported on 4 August 2023 that the country achieved year-on-year growth of 0.6% in 2Q 2023, whereas it also indicates a small, negative growth (-0.3%) from the previous quarter. The short-term effects of decreased energy costs have boosted commercial activity, but the Organisation for Economic Co-operation and Development’s (OECD) recent Economic Outlook, published in June 2023, forecasts a growth rate of 1.2% for the year and 1% in 2024. This downward trend is due to high inflation and the eventual removal of energy crisis fiscal support measures.
The most recent data from Istat reveals local inflation at 5.5% in August, the fourth consecutive month of decline. The Eurostat Harmonised Index of Consumer Prices (HICP) has produced similar results, with a recent peak in April 2023 (8.6%) and steady decline to August’s 5.5%. The OECD forecasts inflation to continue lowering in the second half of the year, reaching 2.10% in 4Q 2023 and trending towards 6.5% for the year’s average.
Construction materials
The local construction cost index reported by Istat shows continued stability. Industrial construction costs have contracted 3.5% from January to June 2023.
Industrial producer prices have also seen contractions since January, shown in the table below, especially in flat glass, electrical distribution and HVAC materials. Some of these changes are attributed to the energy support measures adopted during the gas crisis at the start of Russia’s invasion of Ukraine and may be short-lived as the government’s fiscal support mechanisms expire.
Market outlook
Construction confidence increased to 10.0 in July, the highest in 2023. Surveyed contractors forecast improved employment opportunities (12.8) and overall improved order books — currently at the year’s high of 7.2. Labour and materials shortages persist in construction at 20.7 and 17.9, respectively. Unemployment in the country has decreased, further supporting the concern of available workers.
Planned investments driven by NextGeneration EU are progressing in full accordance with EU targets. Digitalisation is still the most relevant sector in Italy with ongoing data centre developments. During the last quarter, Gleeds Italy saw new interest from investors in the hospitality and student housing sectors.
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.
