Construction: Business Climate Index Hits New Record High

According to the results of the ifo Business Survey, the business climate indicator for construction hit a record high in April. Although contractors were marginally less exuberant about their current business situation, they were nevertheless more optimistic about the future. Capacity utilization climbed to 78.3%, narrowly missing the figure for the same month of the previous year (80.7%). Almost three fifths of contractors reported production constraints. 48% of contractors surveyed cited constraints due to unfavourable weather conditions (April 2017: 23%), while 12% complained of a lack of qualified staff versus just 5% a year ago. A lack of orders posed a problem for 7% of the contractors surveyed, which was just half the number who cited this as a constraint during the same period last year. The order backlog rose to 4.0 months and exceeded the figure for the same period of the previous year by 0.4 months. The survey results suggest that prices for building services were increased in many places in Germany, with the highest figure on record reported this month. Companies expect further price increases in the months ahead. The most recent figures on official construction price increases also point to an accelerated increase in prices. The price of road works, for example, was 5.3% higher in February than for the same period of last year, marking its fastest growth rate since 1992. As far as staff are concerned, fewer of the contractors surveyed plan to recruit additional workers in the months ahead.