Construction output volumes in Latvia have increased for the third consecutive quarter. In the 3rd quarter of this year, construction output grew by 16.1% compared to the corresponding quarter of the previous year (unadjusted data in comparable prices). This uptrend is also observed in the cumulative 3 quarters, with construction output being 16.1% higher than in the 3rd quarter of 2022. It is evident that the increase in client activity is reflected in better industry indicators.

Looking at the main groups of construction, there are differences in the rate of activity growth. Building construction and specialized construction works are the drivers of industry development in 2023. Activity in engineering construction has increased significantly slower.

In the 3rd quarter of 2023, the growth rate in building construction was the fastest, increasing by 33.2% compared to the corresponding period of 2022. In this period, the non-residential buildings segment determined the growth pace of this main group.

The volume of engineering construction in the 3rd quarter of 2023 increased by 2.3% compared to the 3rd quarter of 2022. This main group maintains the trends of the previous quarter. Activities in urban infrastructure projects and other engineering constructions (comprising construction of hydraulic structures and other unclassified engineering constructions) have increased, slightly compensating for the decrease in road and railway construction.

The volume of specialized construction works in this period was 16.6% higher than in the 3rd quarter of 2022. Growth is observed in all main areas, with the fastest increase in the building demolition and construction site preparation segment.

In the 3rd quarter of 2023, 1189 building permits were issued, a decrease of 8.7% compared to the corresponding period of the previous year. A similar trend is observed in the dynamics of the expected area, with a decrease of 10.3% in this period.

The current positive dynamics of the construction industry indicators allow for an optimistic assessment of its development in the near future. Relatively rapid growth indicators in the sector are also expected in the coming quarters, while various challenges remain, including the relatively high price level and labor availability.

The assessment was prepared by Jānis Ušpelis Economist of the EM Analytics Service