UPDATE 1-Euro zone construction shrinks, Spain weak

(Adds detail, comment, background)

By Huw Jones

BRUSSELS, Aug 20 (Reuters) - Construction output in the 15-nation euro zone shrank by 0.6 percent in June from May as slowing economies and a bursting of housing bubbles in countries such as Spain hammered the sector.

In releasing the data on Wednesday, the European Union's statistical unit Eurostat said that compared with June 2007, construction output in the same month this year sank by 2.4 percent.

Companies in the sector are already hurting with the world's No. 1 brick-maker, Wienerberger (WBSV.VI: Quote, Profile, Research, Stock Buzz), in euro zone member Austria, warning this week that its core earnings will drop by 15 percent this year after a collapse in the UK and U.S. construction markets.

Last month French building materials giant Saint-Gobain (SGOB.PA: Quote, Profile, Research, Stock Buzz) cut its profit forecast and declined to rule out a drop in income this year.

Analysts saw no sign of a let up.

"We saw some fairly good construction data through the first quarter, such as in Germany and there is some payback for that," said Matthew Sharratt, an economist with UBS bank in London.

Construction in the euro zone's biggest economy fell 2.1 percent in June from May.

"We know about the implosion of various construction housing bubbles, particularly in Ireland and Spain and to a lesser extent in Britain. It's a pattern that we should probably anticipate going forward," Sharratt said.

The euro zone recorded its first ever contraction in the second quarter with fallout from the U.S. housing meltdown crisis and ensuing credit crunch partly to blame.

Deterioration in construction appears to be rapid.

Eurostat said construction edged up just 0.1 percent in May, after it revised downwards its initial reading of a 0.2 percent rise for the month.

Slovenia and Spain saw the biggest drops in the single currency area, with month-on-month falls in June of 5.8 percent and 3.1 percent respectively.

The annualised drop in Spain was 15.9 percent.

The sector's pullback in the wider 27-nation EU was more severe with a month-on-month drop of 1.5 percent.  Continued...