German construction is turning the corner, but slowly
At a Glance
The desk's view is that while the German construction sector appears to be on a path toward gradual recovery, significant headwinds remain. According to the latest research from ING, growth is projected for 2026 and 2027, primarily driven by new housing and infrastructure investments. However, with construction output having contracted over 10% from 2020 to 2025, challenges such as high material costs and labor shortages will likely temper this rebound for the foreseeable future. Per the full note , the anticipated growth rates are modest, at 1% in 2026 and 2% in 2027, indicating a slow return to pre-pandemic levels rather than a robust recovery.
Key Takeaways
- 01German construction sector to show gradual recovery starting in 2026.
- 02Projected growth rates of 1% in 2026 and 2% in 2027, driven by housing and infrastructure investment.
- 03Sector underperformance relative to European averages indicates ongoing challenges.
- 04High costs and labor shortages remain significant barriers to recovery.
Full Analysis
What the desk is arguing
The construction sector in Germany is beginning to turn the corner, but this recovery will be cautious and drawn out. Per the analysis from ING, the sector's recovery is projected to commence in 2026 with growth driven by housing and infrastructure, yet will be impeded by high costs and labor shortages.
Supporting this view, Germany's construction output has seen a significant contraction of over 10% in the past five years, while European construction output grew by an annual average of 1.75%. This discrepancy in performance showcases ongoing challenges in the German sector, further complicated by rising interest rates and geopolitical uncertainties impacting investor confidence.
Where it sits in our coverage
Our internal consensus target for EUR/USD is set at 1.075, with a range from 1.04 to 1.12. Specific firm targets include: - jpmorgan: 1.10 for Mar-26 - bofa: 1.04 for Mar-26
This view reflects an expectation for a stable EUR/USD in light of the cautious outlook for the Eurozone economy, positioning our call near the upper end of our established range.
How other firms see it
Firms in agreement with our outlook, such as jpmorgan, see potential for modest appreciation of the euro in relation to construction sector improvements, while bofa holds a contrary view, expecting more significant challenges ahead that could pressure the EUR.
As construction recovery ties into broader economic health, watch the implications for the EUR/USD exchange rate and any shifts in ECB policy, particularly around interest rates influenced by inflation and growth in Germany.
Market Implications
Traders should monitor the EUR/USD levels as the anticipated construction growth could impact overall euro strength. Key resistance could emerge near 1.10, while downside risk remains limited as long as growth expectations hold.
From the original
Articles German construction is turning the corner, but slowly Published 09:03 Manufacturing, Construction and Retail Germany Share X LinkedIn E-mail Copy link Share X LinkedIn E-mail Copy link Download German construction is set for a cautious recovery, with growth returning in
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