In July, domestic construction orders fell by over 30% compared to the previous year, with declines in both public and private sectors. Analysts suggest that the recovery of the construction market in the second half of the year depends on actual project orders and starts.
According to the Korea Construction Industry Institute's "Monthly Construction Market Trends for September," construction orders in July totaled 15.8 trillion won, a 30.6% decrease from the same month last year. This figure also represents a 24.5% drop from the previous month and is 1.3 trillion won lower than the average for July over the past three years.
By order source, public orders decreased by 21.9% compared to the same month last year, primarily due to a reduction in public housing orders and the waning effects of large civil engineering projects initiated in June. Private orders saw a sharp decline of 33.3%, affected by poor performance across civil engineering, housing, and non-residential sectors.
The Korea Construction Industry Institute noted that the diminished impact of early orders in the first half of the year, along with a reduced base effect from last year's government transition, contributed to the decline in orders. The downturn in orders across all sectors, both public and private, highlights a significant weakness in leading indicators for the construction market.
In contrast, construction performance, which reflects actual work completed, showed slight improvement. In July, construction performance reached 11.7 trillion won, a 2.4% increase from the same month last year. Public performance rose by 12.4%, while private performance saw a modest increase of 0.4%.
By sector, civil engineering performance increased by 12.6%, while building performance decreased by 0.9%. Notably, residential building performance dropped by 7.9%, hindering recovery in the construction sector. Overall construction performance was also 1.1 trillion won lower than the average for July over the past three years.
Employment in the construction industry also declined. In July, the number of construction workers was 1.865 million, down 3.0% from the same month last year and 1.5% from the previous month. This contrasts with a 0.4% increase in total employment across all industries during the same period.
Cost pressures in construction persisted. The construction cost index for July was 138.59, up 5.8% from the same month last year, significantly exceeding the consumer price inflation rate of 2.8%. The construction cost index has risen for 12 consecutive months since August of last year.
The Construction Business Survey Index (CBSI) for August, which reflects the sentiment of construction firms, stood at 72.7, a slight decline of 0.1 points from the previous month. The outlook index for September is projected at 74.1, well below the baseline of 100.
Lee Ji-hye, a researcher at the Korea Construction Industry Institute, stated, "The actual execution of public order plans and the recovery of private housing and non-residential projects will determine the trajectory of the construction market in the second half of the year."
* This article has been translated by AI.
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