Germany's booming construction sector raises 2018 sales forecast

Berlin

GERMANY'S construction companies are benefiting from soaring demand for real estate, increased investments in buildings and higher state spending on infrastructure, the HDB Construction Industry Association said on Wednesday as it raised its sales forecast.

The construction sector body, which represents large industrial companies such as Hochtief, said it now expects nominal sales growth of 6 per cent this year, up from the 4 per cent it had projected in January. That would bring overall sales volumes close to levels last seen during the boom times after the reunification of East and West Germany in 1990 and the economic upswing in the east of the country in the mid-1990s.

Higher construction prices caused by capacity constraints, labour shortages and rising wages mean that real sales are likely to grow by about 2 per cent this year, HDB added.

German unions and employers last week agreed on an inflation-busting pay increase of about 6 per cent for more than 800,000 construction workers, the strongest wage deal sealed so far this year in Europe's biggest economy.

Germany is enjoying a construction boom thanks to a real estate bonanza, increased company investment in industrial buildings and higher state spending on roads, bridges, ports and railways. The upswing in construction has been encouraged by the European Central Bank's ultra-low interest rates, a growing urban population and high immigration over the past five years.

The sector is also helping to propel overall economic growth. In the first quarter, investments in construction were one of the biggest drivers of a gross domestic product expansion of 0.3 per cent, data showed on Tuesday. In housing construction, nominal sales jumped 27 per cent on the year in January and February, HDB said, adding that strong order books were pointing to a continuation of the boom.

The overhang of pending residential building permits increased to more than 400,000, the body said, suggesting that the sector will continue to drive growth in the coming months. REUTERS