In recent months, Germany's housebuilding sector has gotten worse with economic indicators deteriorating at all time lows. Dominic von Achten, CEO of a German building materials company, Heidelberg Materials, stated that Germany's housebuilding sector is in a "confidence crisis." According to the Ifo Institute for Economic Research, the current sentiment and expectations for Germany's residential construction sector hit all-time lows in January. Klaus Wohlrabe, the head of surveys at Ifo, claimed that "the outlook for the coming months is bleak." Additionally, January's construction PMI (Purchasing Manager Index) survey had the lowest reading at 36.3 indicating that housing activity had the worst performance and was declining at a record speed. The housing sector has impacted the rest of Germany's economy as well, leading to an increase in interest rates and hence, reducing investments in the construction sector. As a result, Germany's government reduced its GDP growth expectations for 2024. Although Ifo's data shows that the amount of companies reporting order cancellations has decreased and the lack of orders has also decreased, 52.5% of companies claim that not enough orders are being placed. Though Germans are optimistic that interest rate cuts can provide some sort of relief, stakeholders still have pressing concerns about the housing market.
Link: https://www.cnbc.com/2024/02/23/germanys-housebuilding-sector-is-in-a-confidence-crisis.html
It's a remarkable highlight for the housing sector in Germany. The author questioned whether there is light at the end of the tunnel as pressures such as elevated interest rates continue to weigh on the economy. To me, political influences can impact the housing market, although German effects tend to act more gradually compared to nations like the US, where laws strongly support a housing-driven economy.
ReplyDeleteThis article is concerning since it is saying that the German economy is slowing down and that they are also discussing interest rate cuts to help their economy similar to the situation in the US. The European Central Bank said at its most recent meeting in January that discussing rate cuts was “premature,” even as progress was being made on inflation.
ReplyDeleteI like that we see many similarities to how the German economy is responding to change in regards to observing our own economic systems of the U.S. This does make me wonder though how in specific this impact could influence our own economy. I know we looked into fiscal policy abroad and at home, but is there a large difference between the German and US economies that would show differing or conflicting results?
ReplyDeleteI wonder how these cuts will benefit them in a longer run. With cuts, there is less saving and although stakeholders are saying they are experiencing relief I wonder just how much that will change consumer's attitudes.
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