The seasonally-adjusted construction activity index in Romania edged down by 1.2% m/m in July, but it remains close to the typical level achieved this year — nearly 5% above the last year’s average level.

In July, the construction volume index rose by 6.7% y/y, driven up by the activity in the non-residential buildings segment (+18.1% y/y), the most active this year compared to 2021.

For the whole January-July period, the construction volume index rose by 4.7% y/y, with the non-residential segment up 16.3% y/y.

Notably, the profitability of construction activity deteriorated significantly in the second quarter of the year, when the value added generated by the sector contracted by 1.1% y/y despite the 3.1% advance of the activity volume index. In the first quarter of the year, the value added generated by the sector increased by 6.0% y/y — in line with the 6.3% y/y stronger activity.

The shrinking profitability is expected to impact the activity volume eventually.

For instance, the Romanian industrial group TeraPlast, which is mainly involved in construction materials manufacturing, suspended a residential project citing the prohibitive cost of inputs.

TeraPlast put on ice plans to develop a residential project on the site of a relocated factory, in the central part of Bistrița city.

Ironically, company cited the increase in the prices of construction materials, combined with the accelerated evolution of energy costs and fuels.

TeraPlast had already reached an agreement with Alfa Construct Partners on the project, but the two parties suspended the agreement. TeraPlast said it has not abandoned the idea of such an investment, but postponed it for the time being. At the same time, the company said it remains open to selling the land along with the project, which has all the building permits.