BMI View: Despite strengthening external headwinds, Germany's economy demonstrates resilience, driven by robust private consumption trends. This bodes particularly well for the residential construction sector, which will lead to expansion in the construction industry over the next few years. Over the longer term, the industry will benefit from Germany ' s ongoing transition to a green energy economy as well as considerable investment in the rail sector.
Latest Updates And Structural Trends
Despite external headwinds facing the German economy, we maintain our positive forecasts for the country's construction industry over the next few years. We project the total value of the industry to increase by 1.8% y-o-y in 2016 and 1.4% y-o-y in 2017. However, we keep our relatively subdued longer-term outlook, mostly on account of limited government funding allocated to infrastructure projects.
After several consecutive years of declines, Germany's transport infrastructure industry is set to rebound in 2016, recording a 3.6% y-o-y growth in real terms. Industry expansion will be driven primarily by the railways sector, with smaller contributions coming from roads & bridges as well as airports sectors. During 2016-2025, the industry is forecast to average an unimpressive 1.7% growth rate, with the upside risk coming from plans for greater state investment in this area.
In May 2016, Germany's Federal Railway Authority, granted approval for the construction of the final section of the second east-west S-Bahn tunnel in the German city of Munich. The EUR3bn (USD3.45bn) project involves building a 14km line from Laim in the west to Leuchtenbergring in the east.
We forecast growth in energy and utilities sector to accelerate to 4.2% and 3.0% in 2016 and 2017 respectively. Driven by Germany's ongoing transition to a green energy economy, the sector is forecast to average 2.2% expansion during 2016-2025.
Denmark-based DONG Energy has decided to proceed with the 450MW Borkum Riffgrund 2 wind project off the coast of Lower Saxony, Germany. The project will have a total export capacity of 450MW and is scheduled for completion in H1 2019.
We hold our upbeat outlook for Germany's residential and non-residential building industry, which is forecast to average 1.3% growth per annum during 2016-2020. That said, we expect a slight slowdown in the second half of our review period, with the expansion averaging 0.9% over 2021-2025.
|e/f = BMI estimate/forecast. Source: Federal Office of Statistics, BMI|
|Construction industry value, EURbn||128.09||131.16||134.77||139.55||144.30||148.77||153.38||157.83||162.65||167.36||172.48|
|Construction Industry Value, Real Growth, % y-o-y||0.30||1.80||1.35||1.85||1.50||1.20||1.20||1.00||1.15||1.00||1.16|
|Construction Industry Value, % of GDP||4.2||4.3||4.3||4.3||4.3||4.3||4.3||4.3||4.3||4.3||4.2|
This quarter Germany maintained its previous score and position in our latest RRI for North America and Western Europe. With the score of 72.9 out of 100, Germany comes fourth among 17 regional markets.
Germany's infrastructure is well developed and, besides the energy sector, there is little scope for strong growth in the construction industry. This is reflected in a weak Industry Rewards score of 62.5 out of 100.
Germany enjoys high scores for the Industry Risks component, which benefits from a large and competitive market as well as efficient and transparent public procurement and tendering procedures.
|Risk/Reward Index||Rewards||Industry Rewards||Country Rewards||Risks||Industry Risks||Country Risks|
The Germany Infrastructure Report features BMI Research's market assessment and forecasts covering public procurement and spending on all major infrastructure and construction projects, including transportation and logistics by land, sea and air; power plants and utilities, and commercial construction and property development. The report analyses the impact of regulatory changes and the macroeconomic outlook and features competitive intelligence on contractors and suppliers.
BMI's Germany Infrastructure Report provides industry professionals and strategists, sector analysts, investors, trade associations and regulatory bodies with independent forecasts and competitive intelligence on the German infrastructure and construction industry.
- Benchmark BMI's independent infrastructure industry forecasts for Germany to test other views - a key input for successful budgetary and planning in the German infrastructure market.
- Target business opportunities and risks in the German infrastructure sector through our reviews of latest industry trends, regulatory changes and major deals, projects and investments in Germany.
- Assess the activities, strategy and market position of your competitors, partners and clients via our Company Profiles (inc. SWOTs, KPIs and latest activity).
BMI Industry View
Summary of BMI’s key industry forecasts, views and trend analysis covering infrastructure and construction, regulatory changes, major investments and projects and significant national and multinational company developments. These are broken down into construction (social, commercial and residential), transport (roads, railways, ports, airports, etc), and energy & utilities (powerplants, pipelines and so on).
Industry SWOT Analysis
Analysis of the major strengths, weaknesses, opportunities and threats within the infrastructure and construction sectors and within the broader political, economic and business environment.
BMI Industry Forecasts
Historic data series (up to 2012) and forecasts to end-2024 for all key industry indicators, supported by explicit assumptions, plus analysis of key developments in the market and risks to the main forecasts. Indicators include:
Construction: Industry value (USDbn); contribution to GDP (%); total capital investment (USDbn); real growth (%).
Construction industry real growth forecasts (%) and industry value (USDbn) forecasts for industry sectors are split into Residential and Non-residential and Infrastructure sectors. Where the data is available for particular countries the infrastructure is further broken down into indicators for the transport subsectors of roads, railways, airports and ports and the energy and utilities sub-sectors of power plants and transmission grids, oil & gas pipelines and water infrastructure. This dataset is unique to the market.
The reports also include analysis of latest projects across the infrastructure sectors (transport, utilities, commercial construction).
BMI’s Infrastructure Risk Reward Index
BMI’s Risk Reward Index provides investors (construction companies, suppliers and partners) looking for opportunities in the region with a clear country-comparative assessment of a market’s risks and potential rewards. Each of the country markets are scored using a sophisticated model that includes more than 40 industry, economic and demographic data points. These provide indices of highest to lowest appeal to investors, with each position explained.
An assessment of the competitive landscape and key challenges to entering the market. Details of the largest companies active in the sector across the sub-segments of the industry, including the key financial figures from some of the largest players in the sector.
Examines the competitive positioning and short- to medium-term business strategies of key industry players. Strategy is examined within the context of BMI’s industry forecasts, our macroeconomic views and our understanding of the wider competitive landscape to generate company SWOT analyses. The latest financial and operating statistics and key company developments are also incorporated within the company profiles, enabling a full evaluation of recent company performance and future growth prospects.
The Infrastructure reports draw on an extensive network of primary sources, such as multilateral organisations, government departments, industry associations, chambers and company reports.
*Company profiles are not available for every country. Those reports instead contain information on the current activities of prominent companies operating in the market.