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Construction Output also Shrinks in Three Weakest EU Economies

June 17, 2011

Greece has again become the main story out of Europe (here are couple of the most recent articles from NPR and PBS).  At the same time, Eurostat is continually releasing data that shows just how deep the economic problems are in Europe.  Today’s release was on construction output, and while overall building grew by 0.7% in the Eurozone, it was -0.9% for the entire EU.  More worrisome, the numbers are much bleaker for the Greece, Ireland, and Portugal (the data for Spain was missing, so we will not yet know the whole story on the “PIGS”).  As Figure 1 shows, while the three biggest economies in the Eurozone have seen some construction growth (Germany experienced a huge 34.4% increase over a year ago in the first quarter of this year), Ireland and Greece have seen construction shrink by double digit numbers.

Source: Eurostat

Figure 2 presents a slightly longer term picture of construction in the Eurozone and the three countries that have received bailouts.  The data uses 2005 as the base year (i.e. 2005 output is equivalent to 100).  The chart shows how Greek construction output dramatically declined between July 2009 and April 2011.  Along with Greece’s industrial output data (see Industrial Output Increases for Major EU Economies but Not the Weakest), one gets the sense of the depth of Greece’s economic problems, as both construction and industrial output had been continually declining.  For Ireland, the construction data is very bleak, as output is basically a quarter of what it was in 2005.  However, it is pretty clear that the collapse in construction is what caused Irish economic woes, and Irish industrial output tends to be growing (unfortunately, this industrial growth was more than offset by the shrinking construction sector).

Source: Eurostat

As a result, while the short term problem remains how can Greece pay its debts, the economic crisis does not appear to be going away any time soon either.


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