Business sentiment in Germany‘s residential construction sector declined further in May, despite some improvement in order volumes, according to new data from the ifo Institute.
The ifo Institute’s business climate index for residential construction in Germany stood at -29.3 points in May, down from -28.2 points in April, indicating that firms in the sector remain pessimistic about current market conditions and future prospects.
Construction firms reported a slightly weaker assessment of their current business situation, while expectations for the months ahead improved marginally. However, the overall outlook remains negative.
‘A state of uncertainty’
“Residential construction remains in a state of uncertainty,” commented ifo Institute‘s Klaus Wohlrabe. “Many companies do not currently expect any noticeable upturn in the market.”
Order books showed some signs of progress, with the proportion of companies reporting insufficient orders falling from 43.8% to 42.2%. However, this improvement was offset by a rise in project cancellations, which increased from 10.8% to 11.7% during the same period.
Increased cancellations
The increase in cancellations highlights ongoing caution among customers and investors, many of whom continue to delay or withdraw planned projects. Elevated financing costs, economic uncertainty and concerns about future market conditions have weighed on residential construction activity in Germany over recent years, the institute noted.
“Although companies are receiving slightly more orders again, at the same time, customer uncertainty remains high,” said Wohlrabe. “That’s evident not least in the renewed increase in cancellations.”
Elsewhere, close to one in ten companies (9.7%), reported shortages of important intermediate products needed for construction projects. While supply disruptions have eased compared with the peak levels experienced in recent years, access to materials continues to affect some businesses. Read more here.
