German residential construction faces significant downturn in April

The business climate for residential construction in Germany experienced a sharp decline in April, with sentiment dropping by 9.1 points from -19.3 to -28.4, marking the most significant decrease since April 2022.

Germany

According to German economic think-tank ifo, this deterioration was largely driven by a substantial increase in companies' pessimism regarding future business prospects, alongside a worsening assessment of current conditions.

Furthermore, concerns about supply chain disruptions for crucial intermediate products are resurfacing. In April, 9.2% of construction companies reported material supply constraints, a notable jump compared to the approximately 1% recorded over the previous two years. This issue appears to be particularly affecting basic construction materials.

The share of companies reporting too few orders remained virtually unchanged at 43.8%. The cancellation rate also remained stable at 10.8%.

Klaus Wohlrabe, head of Surveys at ifo, commented: “Geopolitical uncertainty is now also weighing on residential construction in Germany. With fragile supply chains and rising financing costs, the construction industry is facing multiple risks at once. As far as the current business is concerned, the situation remains unchanged.”