Western Mainland Europe Construction Market Report 3Q 2023
Germany
Local economic indicators
The Federal Statistical Office of Germany (Destatis) reported that the country experienced negative year-on-year growth of -0.6% in 2Q 2023, while it also indicates that there was 0.1% growth over the previous quarter. The Organisation for Economic Co-operation and Development’s (OECD) recent Economic Outlook, published in June 2023, forecasts a growth rate of 0% for the year and 1.3% in 2024.
Annual inflation data from Destatis for August 2023 is 6.1%, a slight improvement since June but remaining high due to energy and food prices. The country implemented a third relief package on 1 July to address energy prices, which produced the desired effects within the first month. The Eurostat Harmonised Index of Consumer Prices (HICP) has had similar results, reporting 6.4% in August, a small recovery from the previous month. The OECD forecasts 2023 inflation at 6.3% for the year’s average and 3% in 2024.
Construction materials
The local industrial producer price index, as reported by Eurostat, reveals some ongoing price recovery in wood, flat glass, steel tubes and electrical distribution. Clay and concrete have experienced more significant inflation throughout 2023, likely due to energy price volatility.
Market outlook
Construction confidence has steadily decreased throughout the year, reaching -13.5 in August, likely due to lower order books, insufficient demand and a steady labour shortage.
High interest rates and inflated construction costs have caused some developers to file for insolvency, affecting several billion euros worth of work in addition to other projects that have been shelved for the time being. As anticipated, M&E contractors are extremely busy meeting the increased demand for net zero carbon transitions in new and existing buildings.
In general, the country is nervous about how new energy policies will impact production and manufacturing. Current proposals will require a complete transition from fuel fired heating systems to full electric heat pump systems by the end of 2024.
As always, Gleeds advises regular project budget updates that take into account recent market pricing and local risk factors which may impact project programmes and costs. Undertaking risk analysis studies enables better evaluation and preparation of appropriate contingencies for your particular project conditions and risk exposure.
Taunus Tower, Frankfurt, Germany — Gleeds provided Quantity Surveying/Cost Management services.
