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Report from
Europe
European Central Bank sees economic activity growth
At its 23 July meeting the Governing Council (GC) of the
European Central Bank (ECB) said there were signs of
economic improvement in the Euro area, even though it
remains moderate.
The GC decided to keep the three ECB interest rates
unchanged. It said that, with the war in the Middle East,
uncertainty remains high and the full impact of the energy
shock resulting from the conflict has yet to play out. On
the current economic picture, it said that recent
information points to some improvement in activity in Q2
2026, even though the Middle East war remained a
‘headwind’.
“Surveys suggest that activity in the services sector has
partly recovered after weakening in the aftermath of the
energy shock,” said the GC. “Digital services have been
robust, and manufacturing has continued to hold up,
support ed by firms building stocks to guard against
supply chain risks.”
Looking forward, said the GC , indicators suggest
European economic growth will remain modest in the near
term. But the fundamental drivers of medium-term growth
remain intact.
“Private consumption, investment in new digital
technologies, government spending on defence and
infrastructure and some recovery in exports should all
contribute to overall growth momentum,” it said.
The GC renewed its call for urgent action to strengthen the
euro economy while maintaining sound public finances.
“Simplifying and harmonising rules across the EU’s
Single Market , accelerating the energy transition and
completing the savings and investments union are key
building blocks,” it concluded, adding that the digital
Euro, proposed for introduction in 2029 will support
business, complementing physical cash and providing a
means of payment for any digital transaction in the Euro
area.
Euro area inflation declined wo 2.8% in June from 3.2% in
May. Energy price inflation declined to 8.5% from 10.8%
and food price inflation was down to 1.5% from 1.9%.
See - https://www.ecb.europa.eu/press/economic-
bulletin/html/eb202605.en.html
Mixed fortunes in East European building sectors
The Eastern European Construction Forecasting
Association( EECFA) division of building sector monitor
Euroconstruct states that its latest analysis indicates cause
for a ‘little less pessimism’ for the industry in the
Southeast European region, and ‘a little less optimism’ for
building in the Eastern European area.
It said that ‘evolving political turbulence’ in Bulgaria
impacted the construction sector, notably projects reliant
on public funds. However, construction output is forecast
to increase by 2% annually from 2026-28. “Residential
and non-residential submarkets have fared better than
predicted,” said the EECFA latest report.
The organisation’s Croation members pointed to funding
from the EU Military Mobility Package as a ‘promising
source of finance for a wide variety of construction [non-
residential] projects’. “This will help sustain total
construction output, despite declining levels of finance
under the EU’s post-2022 earthquake rebuilding
programmes,” they said. On the downside, Croation
residential building is ‘buffeted by the conflicting
influences or rising prices, declining GDP growth and
interventions by the central bank and government’.
In Romania, construction is described as ‘still in a tight
spot’. “Recent forecasts are more pessimistic,” says the
EECFA report. “2026 might see stagnant GDP , declining
real wages and the highest inflation in the EU. Coupled
with the looming spectre of national deficit causing high
inflation and austerity measures, lower public spending
and wage freezes for public employees.” One bright spot
is support from EU funding for infrastructure, although,
says the report, the boost they can provide is limited.
In Serbia, residential building remains stable and growth is
expected to continue, albeit more modestly.
Meanwhile,non-residential building is described as
‘booming’. The sector is driven by massive investments
for Expo 2027, which is expected to result in double digit
growth in 2026. Following this ‘large scale infrastructure
projects should launch the next big growth cycle’.
Slovenia’s construction output in 2024 and 2025 was just
under €6 billion and is now expected to ‘edge higher’ .
However, growth is increasingly uneven. Publicly
financed projects, notably in education, health and civil
engineering renovation are providing stability. But
residential building is constrained by limited supply and
rising costs, while private non-residential construction,
including of offices, retail and industry developments is hit
by investor caution.
Turning to the Eastern European area, the EEFA’s Russian
members say the downward trend in Russia’s building
sector in 2025 is set to intensify in 2026/27. “The main
reason is the combination of a decelerating economy and
prolonged period of high interest rates, which negatively
impacts demand and limits financing and investment,”
they said.
Both residential and non-residential sectors are expecting a
tough time ahead, with civil engineering remaining the
most resilient subsector due to major infrastructure and
energy projects.
In Turkey anti-inflation measures have depressed
households disposable income resulting in housing
affordability issues. However, the government is backing
construction of a large number of residential projects,
focused on more affordable homes. Since the 2023 the
public share of the housing construction market has
continued to grow. The report concludes that total
construction in the country will hit €93 billion in 2028.
Despite the war, the Ukrainian construction market is
reported as ‘exhibiting high resilience’. Key growth
drivers are commercial, industrial, warehouse and logistics
developments. There has also been an ‘uptick in
residential construction in relatively safe areas’.
In coming years, the construction market is expected to
continue to grow supported by post-war reconstruction
needs’ with the greatest potential seen in residential
building. “At the same time, the future performance of
the market will depend on the security situation,
availability of investment, labour [availability] and the
effectiveness of government reconstruction policies,” says
the report.
See - https://www.euroconstruct.org/news/eecfa-little-less-
optimism-in-eastern-europe-little-less-pessimism-in-southeast-
europe/
Challenging outlook for French economy
The French economic outlook remains challenging
according to a June report from Dutch international bank
and services operation ING.
The report by ING’s Senior Economist in Belgium states
that the prospect of a rebound in the French economy
remains ‘very limited’. Nor would the end of the Middle
East conflict definitely mark the start of recovery.
According to a survey of French businesses, domestic
demand remains stalled and business confidence is only up
a single point to 94, which remains below the long-term
average .
“Overall, the underlying details paint a concerning picture
for France’s economic outlook,” says the ING report .
“The modest improvement is largely attributable to retail,
where sentiment is slightly less negative than in May.
Meanwhile business sentiment in services is at its lowest
since 2021. “
Initial data suggests French GDP growth was likely weak
in the second quarter of 2026, following the 0.1%
contraction in the first quarter. More positively the French
aerospace and shipbuilding sectors remain strong, with
output up 20% year on year.
ING concludes that French GDP growth this year will be
0.4%, down from 0.9% in 2025.
See - https://think.ing.com/articles/french-economic-outlook-
remains-downbeat/
Gauging EUDR trade readiness - survey
A survey is being undertaken by French research, industry
and expert bodies to find out how ready companies across
the timber supply chain are for the implementation of the
EU Deforestation Regulation (EUDR).
The survey is part of a study to help identify the EUDR
compliance challenges businesses face in practice and
document the solutions they are adopting. Companies
along the supply chain have been encouraged to
participate, with a deadline for contributions of August 21,
2026.
The exercise is being administered jointly by the French
Alliance for the Preservation of Forests (APF), the French
Agricultural Research Centre for International
Development (CIRAD) and the NGO Living Forest
Canopy (CFV).
Companies are being asked about the operational
challenges they are encountering in meeting EUDR
requirements, the tools and procedures they are putting in
place to achieve compliance and also wider good practices
and solutions being developed in preparation for the
Regulation.
The survey also seeks to identify in-depth case studies that
can be developed to help steer other companies’ strategies
and also to come up with recommendations.
The wider study is being carried out Scientific and
Technical Forestry Committee expert platform which is
coordinated by the French Development Agency.
Deadline for participation: 21 August 2026
Access the
survey: https://enquetes.ird.fr/index.php/921217?lang=en
EU forest-based industry study to shape legislation
An outlook study is underway into the structure of ‘wood-
based value chains’ across the EU’s forest-based industries
with the outcome potentially helping shape legislation
affecting the sector.
The project is being undertaken by the Joint Research
Centre (JRC) of the European Commission. The view, it
states, is that current data and information are often not
sufficiently representative of today’s industrial practices
and recent technological developments.
So, for the study the JRC is engaging with industry
representatives and trade bodies in a survey.
“The information collected will be aggregated for use to
‘enhance the representation of the forest sector value
chains in [a subsequent] modelling framework,” says the
JRC.
Writing to the Trade Working Group of the Confederation
of European Woodworking Industries (CEI-Bois), Diego
Benedetti, Economic Affairs Director of the European
Organisation of Sawmills, urged members to participate in
the survey.
“It is important that we collect as many inputs as possible
so as to ensure our association is well represented,” he
said. “Given the nature of the questions, companies are
especially suited to fill in the questionnaire, but
associations are also welcome to do so.”
The survey contains general questions about participating
businesses and organisations, their activities markets and
expectations. For these respondents are told that ‘high-
level estimates, ranges, averages and expert judgement are
sufficient’. An accompanying Excel template is designed
to collect more detailed quantitative information, with
respondents invited to provide input and output data in in
roundwood equivalents or other units.
Mr Benedetti requested respondents within CEI-Bois to
share their answers, including the questionnaire , so that it
can ‘collect and collate all data and send a collective input
representing our association’.
The JRC investigates woody biomass flows, including
trade, and creates models to ‘simulate future scenarios to
understand the implications of wood removals through
different indicators, including the forest sink’.
“We analyse interactions between forest ecosystems,
forest resources and socio-economic processes,” it says.
“Our data scientists and forest experts compile and
harmonise statistics at EU and EU Member State level in
an effort to contribute to monitoring the EU Bioeconomy.
Multiple streams of research include mapping of biomass,
multifunctionality of forests, forest management, and
woody biomass flows assessments under the JRC Biomass
Mandate.”
A key focus is how wood is used and how that impacts
supply.
“Wood is a highly versatile material and can be used and
reused in cascade in different processes,” says the JRC.
“The developments in wood-based product markets are
instrumental to the supply of woody biomass for different
purposes.
”Appealing to businesses to participate in the survey, it
says: “Your contribution is highly valuable and will
directly support our research, helping to provide a stronger
evidence base for future policy discussions and decision-
making.”
See
https://ec.europa.eu/eusurvey/runner/technical_coefficients#page
0
and
https://forest.jrc.ec.europa.eu/en/activities/forestbioeconomy/
German construction downturn worsened in July
According to market news and analysis provider
Investinglive, Germany’s construction slowdown
deepened in July. Firms reported a further downturn in
total activity and new orders.
The month saw renewed expansion in civil engineering
activity, the first upturn in three months, and price
pressure and delivery delays also reduced in July, but the
Middle East conflict continued to impact market
confidence. The worst slowdown was in housebuilding,
with output declining at the quickest rate for three
months. The deceleration of commercial building also
worsened.
Average prices paid for building materials and products
continued to rise in the month though rate of increase
slowed to its lowest level since February. Companies cite
blame higher oil prices and its impact on commodities and
fuel costs for higher prices.
See - https://investinglive.com/news/germany-july-construction-
pmi-42-1-vs-44-8-prior/
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