Surging Demand in Construction Industry - Increased Demand in Construction Sector Marked by Rising Orders
The construction industry in Europe has experienced sector-specific variations in order intake and turnover, influenced by geographic, economic, and war-related factors.
In Russia, the construction sector has shown resilience, with the sector valued at 13 trillion rubles in 2022—a 5% increase from 2021. Residential construction notably expanded to 126.7 million square meters, aligning with a government target to greatly increase housing availability and renovate 20% of stock by 2030. This suggests a pivot or resilience in the construction order intake and turnover in Russia, likely driven by strategic prioritization of domestic infrastructure amid war financing needs.
On the other hand, Ukraine's construction sector reflects a complex dynamic shaped by destruction and urgent rebuilding demands. Western Ukrainian regions such as Transcarpathia, Lviv, Ivano-Frankivsk, and Bukovyna are experiencing a construction boom triggered by war displacement and reconstruction needs. However, the broader Ukrainian economy faces enormous losses with critical infrastructure damage, creating fluctuating demand in different sectors including construction.
Several factors contribute to the recent growth in the construction sector, especially in Ukraine’s western regions. These include population displacement from eastern and southern conflict zones sparking increased housing and infrastructure demand in relatively safer areas, reconstruction efforts fueled by national and international financial aid, government targets for large-scale housing construction and renovations in Russia, and economic recovery trajectories where labor market improvements support increased construction activity.
The construction sector in Germany has also shown signs of recovery. The Federal Statistical Office in Wiesbaden reported that the construction industry's turnover increased by 4.1 percent in May, compared to the same month the previous year. The order intake in May increased by 5.3 percent year-on-year, adjusted for price changes. In contrast, the order intake in the high-rise construction sector decreased by approximately 10.4 percent year-on-year, while the civil engineering sector, which includes road construction, has shown resilience amidst the industry's challenges, with an increase of around 20 percent in May.
The economic struggles in the construction sector have been ongoing since the outbreak of the Ukraine war, primarily due to increased material prices and interest rates, leading to a decline in residential construction. The sector's recovery hopes are centered around falling interest rates and federal infrastructure spending.
As the war continues and the scale of destruction becomes clearer, reconstruction and migration will likely remain principal growth drivers in affected areas. The construction industry is hoping for improved conditions in the coming months.
- The fluctuations in the construction sector in Europe demonstrate a need for tailored community and employment policies to address specific industry challenges and stimulate growth, particularly in regions affected by war or economic instability.
- In light of the varying circumstances and dynamics within the construction industry, it is crucial for finance and business strategies to prioritize sector-specific interventions, as seen in Russia's residential construction expansion, Ukraine's rebuilding efforts, and Germany's recovery trajectory.
