MUNICH / LONDON (IT BOLTWISE) – The mood in German housing construction improved significantly in September. The Ifo business climate index rose to its highest level since August 2022, although it still remains relatively low at minus 21.8 points. Despite the positive development, the order situation remains tense as many companies continue to complain about a lack of orders.
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German housing construction is currently experiencing a noticeable improvement in sentiment, as the current Ifo business climate index shows. In September, the index climbed by 4.6 points, reaching its highest level since August 2022. Despite this positive development, the index remains at a comparatively low level of minus 21.8 points. These numbers make it clear that while the sector is showing signs of recovery, it is still far from a stable upward trajectory.
The companies surveyed rate both their current situation and future prospects less negatively than in the previous month. Klaus Wohlrabe from the Ifo Institute comments that housing construction is currently breathing a sigh of relief. Nevertheless, he warns against speaking of a real trend reversal, as the bottom appears to have been passed, but the challenges remain.
Historically, the Ifo index for housing construction was always in positive territory between 2016 and 2021, apart from a brief Corona-related slump. The slump began with the outbreak of the Ukrainian War, which placed a heavy burden on the construction industry. Since then, the industry has slowly been working its way out of the low, with the index at the beginning of 2024 still being over 30 points worse than today.
Despite the slight upward trend, the order situation remains tense. The proportion of companies complaining about a lack of orders has increased slightly, from 45.7 to 46.7 percent. The number of cancellations also remains high, indicating continued uncertainty in the market. Klaus Wohlrabe explains that the increased building permits have not yet been reflected in the companies’ order books.
The construction industry is faced with the challenge of reconciling the increased demand for living space with the current economic uncertainties. Experts see a glimmer of hope in the current development, but structural adjustments are necessary to create stable growth conditions in the long term. The industry must focus on sustainable construction and innovative technologies in order to meet the challenges of the future.
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