The sentiment within the German housing construction sector saw a notable improvement during August. According to the Business Climate Index measured by the Munich-based Ifo Institute, the index rose from -29.0 to -22.7 points.
This increase was primarily driven by more optimistic corporate expectations, for which the indicator jumped significantly from -35.6 to -23.3 points. Despite this rise in prospects, the assessment of the current business situation itself remained largely unchanged, still being characterized by a certain degree of dissatisfaction.
Klaus Wohlrabe, the head of the Ifo surveys, stated that companies are increasingly seeing “light at the end of the tunnel,” noting that the rise in building permits is nourishing the hope that order volumes will pick up in the coming months.
However, there is still little visible evidence of this improvement in the actual order books. The proportion of companies struggling with order shortages stayed almost constant at 41.3 percent. Furthermore, many projects are still being canceled, with 13.4 percent of surveyed companies reporting project cancellations.
On a positive note, the surveyed companies are finding it easier to source materials. Only 2.9 percent reported bottlenecks regarding key raw products in August, a decrease from 8.5 percent in July. Wohlrabe added that this improved mood is currently, at best, an “advanced indication of the future.” He stressed that for a sustainable recovery to take hold, the newly approved projects must now translate into concrete orders.
