The German construction sector, particularly residential building, has experienced a marginal improvement in sentiment during November, according to the latest data from the Ifo Institute. The business climate index edged up from -22.8 to -21.0 points, offering a fleeting moment of respite within a protracted period of decline. While companies marginally revised their assessments of the current situation upward, expectations for the coming months remain subdued, signaling continued fragility within the industry.
The underlying concerns, however, are deeply entrenched. A persistent shortfall in orders continues to plague construction firms, with the percentage reporting insufficient orders increasing significantly from 44.4% to 47.0%. This points to a fundamental lack of demand, exacerbated by broader economic uncertainties and rising interest rates which are impacting affordability and investment decisions.
Compounding the challenges is a worrying trend of project cancellations. The proportion of construction companies reporting project cancellations has risen sharply, reaching 11.0% – the highest figure recorded since October 2024. This indicates that even projects already underway are now facing uncertainty, contributing to instability and diminishing confidence.
“While the companies in residential construction are currently less pessimistic” stated Klaus Wohlrabe, head of Ifo’s surveys, “the future outlook remains unchanged – weak”. The marginal improvement in sentiment does not mask the deeper systemic issues affecting the industry, raising questions about the efficacy of current government initiatives aimed at stimulating residential building. The frequency of project postponements and cancellations underscores a market struggling to sustain itself and casts doubt on the prospect of a genuine recovery in the near term. The data highlights a critical need for structural reforms and targeted support to revitalize the German housing sector and avoid a protracted period of stagnation.