Construction: Price Expectations Hit All-Time High

According to the results of the ifo Business Survey, the business climate in construction remained excellent as the year drew to a close. The current business situation improved, returning to the record high seen in October. At the same time, however, optimism about the business outlook for the next few months waned further. This year, demand for services in the main construction sector particularly benefited from the marked expansion of activities in the multi-family house construction sector, as well as more buoyant demand for new buildings for commercial use. There was also another sharp increase in federal funds for highway construction. The machinery capacity utilisation rate remained at 79.6%, exceeding last year's figure by over one percentage point. Of the contractors surveyed, 39% reported constraints on construction activity. In each case, 12% complained of adverse weather conditions and labour shortages; versus 15% during the same period a year ago. In addition, 8% of construction companies reported a lack of orders. Order backlogs edged downwards by 0.1 months to 4.1 months but remained at a very high level. On balance, around 24% of construction companies felt that their order backlogs were relatively large; versus just 15% a year ago. According to the company figures, price increases were somewhat more widespread than recently. They expected further price hikes in many areas in the near future, with the survey value hitting a new all-time high. Contractors expect their staff numbers to continue to rise in the months ahead, despite more cautious estimates than in November.