Construction: Increasingly Frequent Price Hikes in Structural and Civil Engineering

According to the results of the ifo Business Survey, the business climate in construction improved slightly in March as the surveyed contractors submitted optimistic assessments of the six-month outlook. The previous month’s record assessment of the current business situation was slightly exceeded. On average for the construction sectors, order backlogs rose to a new all-time high (3.9 production months); one year ago, order reserves stood at 3.7 months. Although equipment utilisation fell noticeably, at 76.6% the machine park continued to be very well utilised. Of the participating companies, 74% reported construction constraints (previous year: 61%). Two-thirds reported unfavourable weather conditions as a cause (previous year: 51%). Labour shortages were reported by 9% (previous year: 3%). Order short-falls also affected 9% of the construction companies (previous year: 14%). According to the survey responses, price increases were more frequent and reached the highest level since the beginning of the survey. In the coming months, the scope for price increases is likely to decrease for many contractors. The official price statistics for 2017 signalled a stronger continuation of the construction price increase. The price for building shell work in the construction of conventionally constructed residential buildings, for example, increased by 3.0% in 2017 compared to the previous year (2016: + 1.6%). In road construction, the price increase for construction work on existing roads was 3.7% (2016: + 0.9%). Among the drivers of this development were the increasing imbalance between the demand for construction and the production capacities of the contractors, but also the stronger increases in material costs. The companies continue to plan increases in their workforce in the near future.