Construction Materials Industry Production Decreased by 2.2% in the Third Quarter
According to the results of the Turkey IMSAD Monthly Sector Report for November 2024, production in the construction materials industry decreased by 2.2% in the third quarter of the year. Meanwhile, the construction sector experienced a growth of 9.2% during the same period.
The report notes that production in the construction materials industry grew by 1.7% in the first nine months of the year compared to the same period last year. It was highlighted that production began to decline from the second quarter of 2024. The report indicated that the production of construction materials was influenced by developments in both domestic and foreign demand. It emphasized that foreign demand remained stagnant throughout the year, negatively impacting industrial production. Domestic demand was noted as being dynamic until the first quarter of the year but started to slow down in the second quarter due to the effects of disinflation policies and tight monetary policy, also showing a contraction in the third quarter.
In the first quarter, production in the construction materials industry increased by 10.9%. The report pointed out that expansionary policies were implemented in the economy due to local elections in the first quarter of 2024. Additionally, it mentioned that the production losses caused by the earthquake in the first quarter of 2023 created a base effect, leading to a 10.9% increase in production for the first quarter of 2024. Following the local elections, tight policies were implemented more decisively, and the number of working days significantly decreased in April and June. Consequently, it was stated that production in the construction materials industry contracted by 3.9% in the second quarter of 2024.
In the third quarter of 2024, the normalization of the number of working days and the minimization of political influences were noted. It was also mentioned that the implementation of tight monetary and fiscal policies had intensified. These developments were indicated to have affected both domestic demand and material industry production. The report emphasized that foreign demand remained weak in the third quarter and thus did not support production. As a result of these developments, production in the construction materials industry decreased by 2.2% in the third quarter of 2024. It was forecasted that production would also experience a contraction of 2-3% in the last quarter of the year and in the first quarter of 2025.
The report highlighted that the construction sector experienced significant growth in the second and third quarters of 2024, whereas production in the construction materials industry contracted. It was inferred that the demand generated by the growth in the construction sector had not yet been fully reflected in producers. Additionally, it was shared that wholesalers and other distribution channels were utilizing their existing stocks.
According to the information provided in the report, the construction sector grew by 9.2% in the third quarter of 2024. The growth rate of the construction sector in the second quarter was revised from 6.5% to 6.9%. It was emphasized that the construction sector was not significantly affected by the tightening policy in the third quarter and that its growth accelerated compared to the second quarter. Reconstruction efforts in the earthquake-affected areas, urban transformation following the local elections, and other construction activities were stated to support the construction sector. As a result of these developments, it was noted that the construction sector had shown growth for the last eight quarters.
Construction expenses showed high growth rates quarter by quarter. In the third quarter of 2024, construction expenses increased by 63.3% compared to the same period last year, reaching 1.72 trillion TL. The report emphasized that the increase in inflation/construction costs played a significant role in this substantial growth. It was also stated that construction expenses increased by 9.4% in real terms in the second quarter.
The report indicated that the construction sector grew above the general economy in all quarters of 2023 and that this trend continued in 2024. In the third quarter of 2024, the general economy grew by 2.1%, while the construction sector expanded by 9.2%. It was noted that tightening policies caused a slowdown in many sectors, but the construction sector was affected to a lesser extent. On the other hand, the real estate sector was stated to have weakened by 2.5%.