The construction industry, once basking in a prolonged period of growth with eight consecutive quarters of expansion, now faces a more turbulent landscape. The sustained surge in construction material prices, combined with labor shortages in select EU countries and economic uncertainties, has finally cast a shadow over the positive trend in construction output since the fourth quarter of 2020, reveals EUROFER’s latest reportIn the first quarter of 2023, the construction sector's output experienced a slight decline (-0.1%) after the vibrant rebound witnessed in 2021 and 2022, fueled by governmental support schemes and generous investment in private residential and civil engineering sub-sectors. However, as the realm of real production volumes is affected, gross fixed investment in construction also took a hit (-0.4% year-on-year) in the first quarter of 2023, revealing a clear slowdown in construction investment.The engine of growth in 'other construction' investment, particularly in civil engineering, continued to drive progress in the first quarter of 2023 (+1.9%), but the pace is expected to slacken as public expenditure in construction dwindles. Residential investment showed signs of decline, influenced by higher mortgage rates resulting from monetary policy tightening to combat inflation. Despite these challenges, housing and renovation supporting schemes remained in place across various EU Member States, bolstering construction output.As we look into the future, the outlook for the construction sector appears dimmed by multiple downside factors. Rising construction material prices, shortages in skilled construction workers, and continued monetary policy tightening to curb housing demand are expected to dampen the sector's growth over the next three quarters.The European construction sector's rollercoaster journey saw a decline in 2020 due to the COVID-19 pandemic but rallied with a noteworthy growth of +6.7% in 2021 and +4.9% in 2022. However, the momentum stumbled in the first quarter of 2023 with a mere +0.1% growth, and the road ahead seems even more arduous. Despite substantial improvements in construction confidence since the mid-2020 lows, supply chain issues and the overall economic outlook have cast a shadow on the sector's progress.Looking into sub-sectors, interest rate hikes are poised to impact residential construction demand, while civil engineering's contributions may wane despite support from EU-wide public policies. The private non-residential construction sub-sector, struggling with increasing vacancy rates during the pandemic, is also expected to face hurdles in the near future.As the construction industry treads through these uncertain waters, a mild recession is predicted for 2023 (-0.5%), followed by a modest recovery in 2024 (+0.7%). Despite the challenges, the resilience and adaptability of the construction industry will be tested, and strategic government policies will play a crucial role in shaping its path forward.