Construction: Capacity Utilisation and Incoming Orders Stagnate at High Level

The business climate in construction continued to improve in October, according to the results of the ifo Business Survey, hitting another record high for Germany. Although the contractors surveyed were slightly less optimistic about their business outlook, their assessments of the current business situation were more positive. Machinery utilisation rates edged upwards to 79.6% (October 2017: 78.0%) and have been hovering around the record level of 80% since May. Two fifths of the contractors surveyed complained of constraints on construction activity. In line with last year’s results, 18% of the contractors surveyed complained of a labour shortage, while 7% complained of a lack of incoming orders and another 7% complained of material shortages (October 2017: 3%). On average across all construction segments the order backlog stagnated at 3.9 months, which is slightly above the historical average. There have been no notable changes to capacity utilisation or the order backlog in recent months. Price hikes were implemented on a similar scale as previously in October, but survey results since September have been clearly below the levels seen between April and August. According to official statistics, the increase in construction prices accelerated again in August. The price increase for newly-constructed residential buildings was 4.6%, versus 4.7% for office buildings, and a hefty 6.7% for road works compared to the same period last year. According to survey results, many contractors see scope for further price increases in the months ahead. There was also a clear upturn in the number of contractors that expect to recruit additional staff in the near future, with the survey result climbing to a new all-time high.