Gloomy Prospects for Residential Construction in Germany

The clouds continue to gather over German residential construction. More and more companies are lamenting a lack of orders. In November, 49.1% of businesses had this complaint, up from 48.7% in the previous month. This is now the eighth increase in a row. Order cancellations were reported by 21.5% of companies, almost as many as in the previous month (22.2%). “Residential construction companies are hemorrhaging customers. High construction costs and the current interest rate level are causing many builders to despair. Many projects simply no longer pay off under these conditions and have to be postponed or canceled,” says Klaus Wohlrabe, Head of Surveys at ifo.

New business is so weak that it’s endangering some companies. Financial difficulties were reported by 11.1% of participants, up from 9.9% in October. At an extraordinarily weak -54.6 points, the business climate is at its lowest level since the survey began in 1991. This was another slight deterioration compared to the two previous months, which were similarly weak. “Sentiment among the companies surveyed remains icy,” Wohlrabe says. “At the moment, there’s no improvement in sight.” The current reports on the German budget crisis are unlikely to have had a significant impact on the survey results, as the majority of responses were received in the first half of November. It is not yet clear how the insolvency of SIGNA Holding will affect sentiment.