It’s a marginal improvement to the August reading as Germany’s construction sector remains in contraction or should I say recession. The housing sector remains the biggest drag, with commercial building activity also struggling. That continues to be offset slight by civil engineering activity, though that has also expanded at a slower pace last month. HCOB notes that:
“The construction sector remains in recession. The downturn in residential construction has even deepened, and the decline
in commercial construction activity has only slowed slightly. Civil engineering, the beacon of hope for the construction sector,
which should benefit from the federal government’s announced infrastructure package, is still growing, but the momentum
here has slowed significantly. Overall, the construction sector is still relatively far from an upturn.
“The almost unabated decline in new orders signals that the dry spell will continue for the time being. Against this backdrop,
employment was reduced somewhat more sharply than in the previous month. In line with this, construction companies, on
balance, remain pessimistic about the future outlook.
“The situation in the construction sector is also made more difficult by the fact that construction costs are rising despite the
weak economic situation. This is due to higher input prices and the continuing rise in prices charged by subcontractors.
Although short-term financing costs have fallen in recent years as a result of the ECB’s interest rate cuts, long-term yields,
which are based on long-term German government bonds, remain relatively high. Overall, the environment for the
construction sector remains difficult.”