Despite an increase in public large-scale project orders, the construction industry's recovery remains limited due to a simultaneous decline in private sector contracts for civil engineering, housing, and non-residential projects.
The Korea Construction Industry Institute reported on August 12 that construction orders in June totaled 18.7 trillion won, a 21.7% decrease compared to the same month last year.
Public orders increased by 29.2% year-on-year, driven by large projects such as the Jecheon-Yeongwol Expressway and the Jeju Clean Energy Complex. In contrast, private sector orders plummeted by 41.5% as all segments—civil engineering, housing, and non-residential—contracted. Compared to the average for June over the past three years, the current level is 5.4 trillion won lower, indicating that the expansion of public orders alone is insufficient to offset the downturn in the private sector.
Construction performance showed slight improvement, particularly in public and non-residential building sectors. June construction performance reached 14.1 trillion won, marking a 19.9% increase from the previous month and a 1.6% rise from the same month last year. Public performance rose by 12.2% year-on-year, while non-residential building performance increased by 22.9%.
However, private sector performance declined by 1.1%, with residential building performance dropping by 8.7%. Overall performance remains 1.2 trillion won lower than the average for June over the past three years, suggesting that the construction industry has not yet entered a full recovery phase.
Employment conditions have also worsened. The number of construction workers in June was 1.893 million, down 1.4% from the previous month and 3.4% from the same month last year. Although public and some non-residential construction performance increased, the decline in private orders, the contraction in residential building, and the lagging nature of employment contributed to the ongoing decrease in construction jobs.
Rising construction costs have added to the burden. The construction cost index in June was 138.22, a 5.5% increase compared to the same month last year. While prices for cement and ready-mixed concrete remained relatively stable, the producer price index for rebar rose by 8.6% year-on-year, and the market price index increased by 11.8%, leading to higher material costs, particularly for rebar.
Construction companies' sentiment has also deteriorated. The Construction Business Survey Index (CBSI) for July fell to 72.8, a decrease of 1.7 points from the previous month. A CBSI below the baseline of 100 indicates that more companies view the current construction market pessimistically than optimistically.
Specifically, the new order index dropped to 68.6, down 4.5 points from the previous month. Conversely, the construction performance index rose to 81.7, an increase of 0.8 points, while the order backlog index climbed to 79.7, up 3.4 points. The construction receivables index also increased to 81.6, up 4.6 points, but the financing index fell to 72.8, down 1.7 points.
By sector, the civil engineering index dropped to 72.4, down 7.3 points, and the housing index fell to 67.5, down 8.2 points. The non-residential building index rose to 70.1, an increase of 2.8 points. By company size, the large enterprise index fell to 83.3, down 8.4 points, while the mid-sized enterprise index rose to 74.1, up 1.7 points, and the small enterprise index increased to 60.9, up 1.5 points.
Regionally, the Seoul index plummeted to 74.3, a drop of 14.9 points, while the regional index rose to 70.4, an increase of 2.2 points, indicating a slight reduction in the gap in sentiment between regions.
The comprehensive outlook index for August is 72.5, down 0.3 points from July's performance. This suggests that construction companies anticipate continued sluggishness rather than a clear recovery in the near term.
Lee Ji-hye, a researcher at the Korea Construction Industry Institute, stated, “Despite an increase in public large project orders in June, the simultaneous contraction in private civil engineering, housing, and non-residential orders led to a significant decrease. While performance has slightly improved in public and non-residential construction, and conditions for order backlog and payment collection have improved, challenges remain with slowing new orders, a weak private construction market, declining employment, and rising material costs such as rebar.”
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.