- Prior 46.3
After hitting a 29-month high in July, German construction activity is seen moderating slightly in August. Of note, new orders continued to decline sharply but there are some positives. Civil engineering activity returns back to growth territory in August while the rate of job shedding is seen slowing down markedly on the month. HCOB notes that:
“Germany’s construction sector is still struggling to gain traction. Residential construction continues to shrink at a relatively steep pace, and commercial building activity has taken a sharp hit after a surprise uptick in the previous month. The only bright spot is civil engineering, which showed solid growth in August – likely benefiting from the federal government’s infrastructure program. That dip in the previous month now looks more like a one-off.
“The cautious optimism seen a few months ago has given way to growing pessimism. The index tracking future activity has dropped significantly. Persistently high long-term interest rates and the perception that the new government is also having trouble turning its promises into actual legislation seem to be weighing on sentiment.
“Input price inflation has eased slightly and is now well below the average of recent years. But after the price surge in 2021/22, levels have only partially normalized. Production costs remain high, which continues to hold back momentum in the construction sector.
“There are a few faint signs of a recovery in demand. For instance, supplier delivery times have improved very little, with the index now at its lowest level since February. Also, while the availability of subcontractors is still rising, it’s doing so at a slower pace than the month before. Subcontractors have also raised their prices a bit more than in previous months, which fits the picture. Still, overall conditions remain tough, and any recovery is likely to be slow and gradual.”
