German construction sector to slow

The German construction market is set to grow 2.5% in nominal terms this year and by 1% in real terms, compared with 9.5% nominal growth in 2011, or 6.5% in real terms.

The slowdown was forecast by the German Construction Industry Federation, which said the market would adjust to declines in public spending this year.

Federation president Thomas Bauer highlighted the fact that the 2011 economic stimulus programme which had invested around €6 billion in public funds in construction projects had now expired.

He said the German construction industry expected sales in public construction to decline by a nominal 2.5% this year, compared to growth of 4% in 2011.

Meanwhile, the residential construction sector is poised to benefit from the crisis in the capital markets in 2012, according to Mr Bauer, as investors seeking to avoid instability plough capital into real estate developments. The Federation forecast an increase in residential sales of a nominal 6%, albeit lower than the 14% growth seen last year.

A larger slump is forecast for commercial construction, where sales are expected to increase by 3% in nominal terms in 2012, down from 11% growth last year.

But Mr Bauer emphasised the huge question mark that currently hangs over the German economy as a result of the wider Euro zone sovereign debt crisis.

"A stable Euro zone is the condition for the successful development of the German economy, and thus the German construction industry, in the coming years," he said.