Construction Industry: Order Intake Shows Mixed, Cautious Signals in April
Decrease in construction industry's monthly intake observed during April - Construction sector experienced another decrease in new orders taken in April.
The rollercoaster ride of order intake in the construction sector didn't slow down in March, with civil engineering reaching an impressive 34.3% increase and building construction - including residential construction - barely creeping up by 0.5%. When comparing the three-month span from February to April against the preceding three months, the Federal Statistical Office reports a modest 2.1% overall increase, with civil engineering inching up by 0.8% and building construction boasting a larger 3.6% increase.
However, the uptick in March didn't lead to a sustainable recovery, as suggested by Tim-Oliver Müller, CEO of the Construction Industry Association. Müller remains skeptical about a full-fledged recovery, stating "a sustainable recovery in construction is unfortunately still not in sight." Encouragingly, Müller commended the uptick in residential construction and expressed optimism that the federal budget recently decided on Tuesday would promote increased investment dynamics across all construction areas.
Felix Pakleppa, CEO of the Central Association of the German Construction Industry (ZDB), also points to residential construction. While the industry enjoyed a 16% increase in order intake compared to the same period last year during the first quarter, Pakleppa points out that April's numbers suggest a stabilization at a low level.
The construction industry's turnover reached €9.4 billion in April, up 0.9% compared to the same month last year. After accounting for prices, there was actually a decrease of 1.4%. Adjusted for prices, the total turnover increased by 2.4% over the first four months of the year compared to the same period in 2023.
Breaking down Building Construction and Civil Engineering Trends:
Even though the provided data does not explicitly break down order intake by building construction and civil engineering, trends in related sectors paint a picture of steady but underperforming construction activity. For example, demand for vocational Class 8 trucks, commonly used in construction and infrastructure projects, has remained flat, mirroring ongoing infrastructure work but falling short of earlier growth expectations. Public project starts have slowed due to tighter fiscal conditions and uncertainties surrounding future stimulus packages, hinting at stable but stagnating new order intakes for construction projects.
The slowdown in public infrastructure projects and tamed construction activity suggests constrained growth or cautious order intake in civil engineering projects, often relying heavily on public funding.
Industry-Wide Order Intake Context:
In adjacent sectors like the U.S. trailer market, order intake in May dipped more than 26% from April but was about 12% higher than subdued levels seen in May 2024. This points to a seasonal peak passing, with expectations of weaker intake through mid-Q3 and growing cancellation trends, indicating economic uncertainty and escalating costs.
Similarly, the Class 8 truck market, which provides support for construction equipment transport and operations, has experienced slowed production and orders, with net orders plummeting and build rates declining as OEMs adjust to weaker demand. Cancellations have increased, underscoring hesitancy in large fleet and equipment investments amid lingering economic uncertainties.
Summary:
On the whole, building construction and civil engineering order intake in recent months has been stable but lacks robust growth, following broader industry trends of moderate demand and restrained investment in construction infrastructure. Supporting equipment sectors exhibit reduced order intake and increased cancellations, echoing general industry caution. The near-term forecast suggests a period of flat or possibly declining order intake in construction-related segments, influenced by fiscal and market uncertainties.
In conclusion, order intake in building construction and civil engineering remains steady but lacks growth, in line with broader industry trends of cautious demand and delayed investment in construction infrastructure.
- The construction industry's ongoing caution may also be reflected in EC countries' employment policies, as stable but underperforming construction activity could lead to decreased demand for workers in associated sectors.
- To promote sustained growth in the construction industry, national employment policies within EC countries might need to consider ways to incentivize increased investment, such as providing subsidies or tax breaks for construction projects, mirroring the recently approved federal budget in Germay.
