Market Report 3Q/4Q 2022
Spain
Gross domestic product
The gross domestic product in Spain maintained a positive growth rate in 3Q 2022 despite increasingly challenging energy costs and elevated inflation which peaked in July at 10.8%. In October, the Spanish government passed measures to ease the energy crisis by approving price reductions for low-income households and industrial consumers. September and October experienced significant drops in inflation, most recently reported at 7.3%, well below the European Union average.
Despite declining construction production in the country, the monthly European Union construction survey reported increased building activity in October, after negative figures in August and September. Employment expectations for the next quarter are favourable despite fluctuating predictions throughout the year. Overall, the Spanish construction confidence indicator is the highest in the Gleeds EMEA region.
Construction materials
The Spanish Chamber of Commerce has reported decreases in indexed corrugated steel pricing, from 192 in April to the latest October report of 121 (where 12/2019 = 0). Additionally, the construction cost index, as provided by the local Ministry of Transportation, Mobility and Urban Works, reports a decline in August of 1.2% after a peak in June of this year (considering materials and labour pricing). However, in keeping with the industrial producer indices reported in September, tenders received at the end of 3Q have shown increases in items such as flat glass, clay building materials and electrical distribution material, likely a direct result of elevated energy pricing. Materials supply times continue to be problematic as factories reduce production hours in response to unsustainable energy costs.
Pricing control mechanisms approved by the Spanish government in October are expected to ease energy expenses for the industrial sector. Combined with ever decreasing commodity pricing, this should lead to more controlled inflation in construction materials for 2023.
Licensing
During the pandemic, the average time for obtaining construction permits lengthened, due to reduced municipal staff capabilities. A continuing issue, project approval now takes approximately twice as long as it did in 2019. Previously commonplace for expediting the licensing phase, it has become increasingly difficult to meet with town hall staff to clarify requirements and pre-construction programmes should allow longer for licensing times.
Market outlook
Considering the local industry has been in decline since 1Q 2019, the overall construction confidence indicator has improved during the third quarter. Contractors are optimistic as they move into the final quarter of the year, with positive employment expectations and capability to take on more work.
As always, Gleeds advises regular programme and budget updates that take into account local risk factors which may impact project performance. Risk analysis studies are recommended to better evaluate and prepare appropriate contingencies for your particular project conditions and risk exposure.
