Residential construction in Germany is experiencing an order shortage. More than half the companies (55.2%) in this industry reported a lack of orders in April. In March, the figure was 56.2%. “Housebuilders are looking for signs of hope,” says Klaus Wohlrabe, Head of Surveys at ifo, “but there’s no end to the crisis in sight.”
The order shortage in Germany has worsened and is an obstacle to the economy. In April, 39.5% of manufacturing companies reported a lack of orders, up from 36.9% in January. In the service sector, the proportion rose from 32.1% to 32.4%. “The lack of orders is hampering economic development in Germany,” says Klaus Wohlrabe, Head of Surveys at ifo. “Almost all industries are affected.”
German manufacturers hardly have to struggle with material shortages anymore. In March, 10.2% of the companies surveyed reported shortages, down from 14.6% in February. “The supply of raw materials and intermediate products has recently seen significant improvement,” says Klaus Wohlrabe, Head of Surveys at ifo. “The situation is now almost back to how it was before the coronavirus crisis.”
Cancellations in German residential construction have increased. Just under one in five companies (19.6%) reported canceled orders. In February, the figure was 17.7%. “The situation in residential construction remains tense,” says Klaus Wohlrabe, Head of Surveys at ifo. “There aren’t enough new orders to offset the cancellations.”
The shortage of skilled workers among companies in Germany has eased somewhat. According to the survey, 36.3% of firms are currently suffering from a shortage of qualified workers, down from 38.7% in October 2023. A year ago, it was 43.6%. “The weakening economy is reducing demand for skilled workers in the short term,” says ifo expert Klaus Wohlrabe, “but the fundamental problem is here to stay.”
The ifo Business Climate in residential construction has reached a new low. It fell to -61.9 points in February, down from -60.7 points in January. More than half of the construction companies surveyed are dissatisfied with the current situation. Expectations are also stuck at rock bottom. “At present there isn’t a single ray of hope on the horizon for residential construction,” says Klaus Wohlrabe, Head of Surveys at ifo. “Orders continue to be canceled. At the same time, building permits for apartments are in free fall.”
Material shortages in German manufacturing have become slightly worse. In February, 14.6% of the companies surveyed reported shortages, up from 12.5% in January. These are findings from the ifo Institute’s latest survey. “In addition to the ongoing conflict in the Red Sea, the rail strike in Germany has also led to a shortage of raw materials and intermediate products at some companies,” says Klaus Wohlrabe, Head of Surveys at ifo. “Nevertheless, the supply bottlenecks are not a fundamental problem for industrial production. At present, we’re mainly seeing delays within supply chains, not a total breakdown.”
The business climate in German residential construction has fallen from -56.9 points to -59.0 points – the lowest value ever measured. The same is true for business expectations, which have sunk even further, dropping from -64.7 points to -68.9 points. “The outlook for the coming months is bleak,” says Klaus Wohlrabe, Head of Surveys at ifo. “Residential construction is still facing the double whammy of a lack of new orders and ongoing project cancellations.”
The lack of orders in manufacturing is increasingly becoming a burden on the German economy. In January, 36.9% of manufacturing companies reported a lack of orders, up from 36.0% in October. A year ago, the proportion was just 20.9%. In the service sector, the proportion rose from 29.3% to 32.1%. “The lack of orders has worsened noticeably over the past year. Hardly an industry has been spared,” says Klaus Wohlrabe, Head of Surveys at ifo. “What’s more, order backlogs are shrinking.”
Material shortages in German manufacturing continue to reduce. In January, 12.5% of the companies surveyed reported shortages, down from 18.2% in October. “At the moment, the attacks on commercial shipping in the Red Sea aren’t affecting the supply situation for raw materials and intermediate products,” says Klaus Wohlrabe, Head of Surveys at ifo.
It has become slightly easier for German companies to obtain new loans. In December, 25.6% of companies in ongoing credit negotiations reported restraint on the part of banks; in September, that figure was 29.2%. “However, the banks remain cautious when it comes to lending,” says Klaus Wohlrabe, Head of Surveys at ifo.
The ifo Business Climate Index for residential construction has sunk to an all-time low. Sentiment in December fell to -56.8 points, down from -54.4 points in the previous month. This is its lowest level since the survey began in 1991. Dissatisfaction with the current situation is escalating. Companies also fear further business losses in the first half of 2024. “Although interest rates for home loans have recently been falling again, there is as yet no sign that the situation is easing,” says Klaus Wohlrabe, Head of Surveys at ifo. “These exceptionally weak expectations show that companies currently have no hope. The prospects for 2024 are bleak,” Wohlrabe says.
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.
German manufacturing is seeing a considerable reduction in material shortages. In October, 18.2% of the companies surveyed reported shortages, down from 24.0% in September. This is a finding from the ifo Institute’s latest survey. “Things are almost back to pre-crisis levels,” says Klaus Wohlrabe, Head of Surveys at ifo. “Companies should plan now for future shortages, diversify their supply chains, and increase inventory levels.”
Germany’s wave of cancellations in residential construction continues. In October, 22.2% of companies reported canceled projects, up from 21.4% in the previous month. “It’s getting worse all the time, with more and more projects failing due to higher interest rates and elevated construction prices,” says Klaus Wohlrabe, Head of Surveys at ifo. “In residential construction, new business remains very low and companies’ order backlogs are diminishing.”
It is becoming more difficult for companies in Germany to obtain new loans. In September, 29.2% of companies in ongoing credit negotiations reported restraint on the part of banks. In June, that figure was only 21.3%. “Banks are gradually increasing interest rates on loans and are more reluctant to grant them,” says Klaus Wohlrabe, Head of Surveys at ifo.
Supply problems in German manufacturing continue to ease. In September, 24.0% of the companies surveyed reported material shortages, down from 24.4% in August. “Things are settling down,” says Klaus Wohlrabe, Head of Surveys at ifo. The situation remains most problematic in the automotive industry, where just under 53% of the companies reported bottlenecks in the supply of raw materials and intermediate products.
The crisis in the German residential construction sector continues to intensify. In August, 20.7% of companies reported canceled projects, up from 18.9% in the previous month. This is a finding of surveys by the ifo Institute. “Residential construction cancellations are piling up to a new high. We haven’t seen anything comparable to this since the survey began in 1991. The uncertainty in the market is huge,” says Klaus Wohlrabe, Head of Surveys at ifo.
German manufacturing is seeing fewer material shortages. In August, 24.4 percent of the companies surveyed reported shortages, down from 29.5 percent in July. This is a finding from the ifo Institute’s latest survey. “The situation is trending more and more toward pre-crisis levels,” says Klaus Wohlrabe, Head of Surveys at ifo. “Business problems are now shifting from the supply side to the demand side.”
The slump in residential construction in Germany continues. In July, 40.3% of companies complained of a lack of orders, up from 34.5% in June. A year ago, the proportion was 10.8%. These findings are from the ifo Institute’s latest survey. “A storm is brewing. Following many years of expansion, now higher interest rates and the drastic rise in construction costs are choking off new business,” says Klaus Wohlrabe, Head of Surveys at ifo.