The construction industry experiences its most significant expansion since the closing of 2021.
For quite some time, the German construction sector has been grappling with a decrease in demand. The situation appears grim, and a change in economic strategy is being advocated for. However, there are indications of a resurgence in the construction industry, at least in the primary construction sector, due to substantial contracts.
In August, the German construction industry experienced its strongest growth in orders in over two and a half years. The main construction sector witnessed an 14.2% surge in orders compared to the preceding month, as per the Federal Statistical Office. They attributed this spike to several significant contracts, marking the largest increase since December 2021. The civil engineering sector, which includes public works like road construction, showed an 8.7% increase in orders compared to the previous month. Remember, the building construction sector, heavily influenced by residential construction and predominantly reliant on private demand, even reported a 21.4% rise.
However, comparing August to the same month in the previous year, orders saw another decrease: a 5.3% actual drop. Yet, August 2023 set a new record for this month in the statistics. From January to August, the main construction sector reported a 0.6% actual reduction overall.
Revenue in the main construction sector increased in August: it rose by 3.3% compared to the same period in the preceding year, reaching 10.2 billion euros. After accounting for inflation, this resulted in a surplus of 0.8%.
The mood in the main construction sector has shown a slight improvement, as per the Ifo Institute's business survey. However, the index remained at -25.2 points in September, deep in the negative zone. The assessment of the future months was a tad less pessimistic. "However, the companies were less satisfied with the current business activities," stated the Ifo Institute.
The industry is keeping its fingers crossed for a further loosening of monetary policy by the European Central Bank (ECB). The ECB has already lowered its interest rates in June, September, and October. Another decrease might be on the cards in December. This could potentially make construction loans more attractive once again. But, economists predict, any recovery in the construction sector might be delayed.
The resurgence in the construction industry has led to an increase in demand for apartments. Many developers are now focusing on building modern and energy-efficient apartment complexes to cater to this growing demand. The strong growth in orders in August was largely due to substantial contracts for residential construction, including apartment buildings.
