Investment Lull To Limit Construction Growth
BMI View: While the German construction industry has returned to growth over the first half of 2014, in line with our forecasts, we continue to note that activity in the sector will not impress over our 10-year forecast period. Weak domestic consumption and concerns over the impact of the Ukraine crisis will discourage investment. Meanwhile, the government continues to offer little in terms of major infrastructure investment plans.
Despite Q114 data revealing that the German construction industry grew in real terms by 7% year-on-year (y-o-y) over the first three months of 2014, we are maintaining our forecasts for full-year growth of 1.7% y-o-y. Not only was Q113 data particularly weak, meaning base effects have boosted Q114 data, but there are also signs that the German economy - and by extension activity in the construction sector - will slow over the second half of the year.
After performing well over 2013 and the beginning of 2014, a number of leading construction indicators are pointing to slowing momentum in the construction industry. The Markit Germany Construction Purchasing Managers' Index has now been in negative territory for four consecutive months and is currently standing at 48.2 (50 represents neutral).
|Muted Outlook Begining To Show|
|Construction Industry Value (EURbn) and Real Growth (% Change y-o-y)|