Bumper 1Q for German construction sales

It was a bumper first quarter for Germany’s construction sector, marking the strongest first quarter for construction housing sales in 20 years, according to Germany’s construction sector association, the Hauptverband der Deutschen Bauindustrie (HDB), in a sign that the once tepid market is now booming.

Turnover at construction firms with more than 20 employees totaled €13.7b in the first quarter, an increase of 6.3% y-on-y, according to the HDB. However, most of the turnover can be attributed to the first two months, with turnover falling by 5.4% in March, according to the HDB. The weather contributed significantly to a sluggish month: 66% of firms surveyed for the Ifo Business Survey said that they had experienced weather-related delays in March, up from 51% last year.

The overhang of pending residential building permits also increased to more than 400,000. Subsequently, the HDB has raised its sales forecast for this year to 6% for 2018, up from an initial forecast of 4% in January. However, rising construction costs, labour shortages and rising wages mean that real sales are likely to grow by about 2% this year, the HDB said.

Germany's construction companies are benefiting from burgeoning demand for real estate and increased investment in property as well as higher state spending on infrastructure, according to the HDB.

Construction workers are also benefitting from one of the biggest pay rises in Europe so far this year: in April, German unions and employers agreed on an inflation-busting pay increase of around 6% for more than 800,000 construction workers.

In addition, the uptick in construction has been underpinned by the European Central Bank's ultra-low interest rates. In the first quarter, investment in construction was one of the biggest drivers of GDP growth of 0.3%.