Business Climate Index Rises in Germany’s Residential Construction

The business climate index in residential construction in Germany has risen significantly, but the majority of companies remain pessimistic. Its index managed to climb from -52.3 points to -46.4 points. Expectations and the situation improved at a very low level. “Housebuilders are hoping that the worst of the economic downturn is behind them,” says Klaus Wohlrabe, Head of Surveys at ifo. “But the road to recovery is still long.”

The lack of orders remains a key problem. In May, 51.7% of the companies reported shortages, down from 55% in April. Despite the decline in cancellations, the all-clear has yet to be given. In May, 15.1% of building construction companies reported cancellations, down from 17.6% in the previous month. “Many companies are trying to counteract the order shortage by cutting prices,” says Wohlrabe.

The business climate index has also recovered in civil engineering. At -6.7 points, up from -10.2 points in April, it is noticeably better than in residential construction. Civil engineering companies are considerably more satisfied with their current business. “Civil engineering companies would be delighted to receive more orders,” says Wohlrabe.