Construction Sector Struggles in February, Particularly in Civil Engineering: A Glimmer of Hope Mixed with Challenges
Construction orders in February witnessed a decline, primarily in civil engineering projects. - Building orders declined in February, predominantly in the civil engineering sector.
The German construction industry is showing some signs of life, albeit faint, as orders in building construction increased by a hopeful 1.1% compared to January in February. However, this optimistic start is overshadowed by a significant 14.8% drop in civil engineering orders. The association leading the charge in the industry, the Central Association of the German Construction Industry, attributed the decline in civil engineering to a host of factors.
According to Tim-Oliver Müller, the main managing director of the construction industry, the interim budget management and the absence of any new projects since the demise of the traffic light coalition towards the end of 2024, has left the civil engineering sector in a precarious position. Müller warned that if the new federal budget for 2025 is not decided before autumn 2025, the federal government could go almost a year without contributing significantly to construction projects as an investor.
Despite the gloomy forecast, the German railway and Autobahn GmbH are hurrying to secure new funds to ensure that construction projects make it to market. The construction sector's overall turnover increased in February, with a nominally impressive 4.0% rise and a price-adjusted 1.8% climb, amounting to approximately 12.7 billion euros. However, the gains are coming from a very low starting point, as Felix Pakleppa, the association's main managing director, cautioned.
The residential construction sector saw orders worth over 3.1 billion euros in the first two months of the year, representing an impressive nominal increase of more than 21% compared to the previous year. Yet, Pakleppa emphasized the need for an investment-oriented economic policy from the future federal government to give the construction industry the "sustainable momentum" it needs.
While industry optimism lies with the federal government's infrastructure fund, the production decline in construction (a 3.2% drop in February 2025 compared to January), and the segmental challenges faced by the building construction sector suggest that the road ahead is fraught with challenges. A mixed German economic sentiment, with other sectors like manufacturing and retail showing more pessimistic outlooks, could further affect construction demand.
In the face of these challenges, there are potential opportunities for growth in the long run. As government initiatives take effect, infrastructure projects may boost sector growth for the construction industry in Germany. However, the industry will likely face economic uncertainty, potential job impacts, and a possible delay in investment in the short term due to the current state of orders.
- Despite the optimistic start in building construction, vocational training in the construction sector may be impacted by the significant decline in civil engineering orders, as mentioned by Tim-Oliver Müller.
- The federal government is currently in a precarious position to contribute significantly to construction projects as an investor, due to the delay in deciding the new federal budget for 2025, as warned by Müller.
- In contrast to the construction sector, the German railway and Autobahn GmbH are looking to secure new funds for construction projects, showing a continued involvement in the sector despite weather challenges or declines.
- To ensure sustainable momentum and growth for the industry, an investment-oriented economic policy is needed, according to Felix Pakleppa, emphasizing the importance of vocational training for future workers in the construction sector.
