Ouch. German construction activity slumps further in October, falling at its quickest pace in seven months. Of note, housing activity remains the weakest by some margin with a further decline in commercial building while civil engineering activity also returned to contraction on the month. HCOB notes that:

“This is a heavy blow for the construction sector, which was already under pressure. Across the sector as a whole, activity
dropped in October at the fastest rate since March this year. The most striking result was the decline in civil engineering,
where we had seen moderate growth over the previous two months. The situation in residential construction is even more
dramatic, with the deep recession worsening further. Commercial construction also took a hit, though the drop was less
forceful than the decline in housing activity. Overall, the numbers reflect a climate of uncertainty, high building costs, and
relatively high long-term interest rates, which have hovered well above the levels of the previous decade for the past two
years.

“The slump in civil engineering activity shows that the large-scale infrastructure investments the government has already
started are clearly subject to bigger fluctuations. We expect growth in this sector to stabilize over the course of next year,
once a broader range of public projects gets approved and rolled out.

“In residential construction, activity is falling faster than at any other point this year. It’s pretty clear that the so-called
“building turbo” from the federal government – which mainly aims to ease zoning regulations and speed up approval
processes – isn’t working at all. It looks like we’ll need additional measures, like direct subsidies and more social housing, to
really tackle the housing shortage.

“Incoming orders are shrinking a bit less than the month before, but they still signal that the construction sector isn’t heading
for a turnaround just yet. Confidence in higher construction activity a year from now remains low, and demand for
subcontractors has dropped sharply. On the bright side, cost inflation has come down significantly and is now well below the
long-term average. That could help improve profitability for construction firms.”