Is there a Serious Recession in Construction?


Is there a Serious Recession in Construction?

The dynamic and volume of building activities all around the globe must be differentiated by region, often even by country. But one thing can generally been stated: the construction economy has slowed down since last year. The reasons of course are manifold, but the major impact factors are basically three: the worldwide slow down due to the Corona outbreak, inflation, rising raw material and logistics cost => the end of the low-interest area and the war of Russia in Ukraine. These three factors combined seem to make a poisonous mix for growth.

Recently, the German Statistics Office has revised its numbers: now it sees a loss in GDP in two consecutive quarters, which by definition is being called a technical recession. In Germany, effects caused by above factors are eminent: cost of construction has become high, real estate prices drop, orders in construction are stagnant or drop (from March to April by -20%!), new financing is expensive, the backlog of jobs has been finished in the last three years during and after Corona and there is s shortage in skilled and unskilled labor to finish existing orders. All these effects combined lead to a decisive slow down of the construction economy, and thus the demand for raw materials here. When looking over the borders, similar scenarios (although partially for different reasons) can be observed in Western Europe, and particularly in the UK. Drawing the circle even larger using some examples, China is suffering market shrinkage and falling real estate prices since years and the market for building materials in Brasil has become problematic due to political insecurities. From my perspective only the Middle East, and here particularly Saudi Arabia with its announced huge investments has a serious and sustainable growth in construction at the moment.

This outlook might seem dim to you, but I would like to remind everybody that the drymix mortar industry has a unique position amongst the building materials. Drymix mortars and their application make up only 3 to 5% of the entire building cost (new construction, land cost not included) – yet they are absolutely needed for finishing. Drymix mortars are versatile and thus essential for green building, not only in External Insulation and Finishing Systems (EIFS). Drymix mortars have quite some (better: huge) room to grow: currently, still over 65% of the mortars used in construction (mostly volume mortars such as masonry mortars, thick screeds and renders) are being mixed by hand on the jobsites around the globe. And, last but not least, drymix mortars are being used over-proportionally in repair and renovation of existing buildings. The building refurbishing market usually blooms in times like these, when new construction slows down. So, I think, our industry has it in its own hands to make this tight economic situation a bearable one.

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