Construction: Business Climate Remains Excellent

According to the results of the Ifo Business Survey, the business climate in construction remained at an exceptionally high level historically in March. Compared to last month, the climate indicator even rose slightly. As in February, this marked a new German record. While expectations for the month ahead clouded over, assessments of the current business situation were more favourable. The companies surveyed were thoroughly satisfied with their current business situation, with this component reaching its highest value since German reunification. At 72% (seasonally and weather-adjusted) the machinery capacity utilisation rate remained at the level of last month and the same month a year ago. As in February, 84% of companies reported construction constraints. Over three quarters of survey participants reported constraints due to unfavourable weather conditions (last year’s value: 63%); while a fifth complained of a lack of contracts. The order backlog climbed to an average of 3.1 months (seasonally and weather-adjusted) and hit a new record for Germany. On balance, 23% of firms assume that their construction activity will increase over the next three months (March 2012: 12%). According to survey results, price increases were implemented more frequently. Company reports suggest that there may be further scope for price increases in the months ahead. However, they are more cautious about recruiting additional staff than last month.