The residential construction sector experienced a renewed downturn in sentiment during August, according to the Ifo Institute’s latest business climate index. The index dropped from -24.2 to -26.3 points, signaling a pause in the tentative improvement seen in previous months.
Both expectations for the coming months and assessments of the current situation have deteriorated. “The cautious optimism of recent months has taken a break” explained Klaus Wohlrabe, head of Ifo’s surveys. He added that it will take time for increased building permits to translate into a tangible improvement in order books.
While the proportion of companies reporting a lack of orders saw a slight decrease, falling from 46.1% to 45.7%, the level remains significantly elevated. Concurrently, the cancellation rate increased from 8.2% to 8.5%, reflecting ongoing challenges related to weak demand.
“Businesses continue to grapple with a subdued demand environment” Wohlrabe stated. He indicated that planned policy interventions have yet to generate substantial impact and suggested continued patience is required within the sector, particularly concerning residential mortgage lending.