FX.co ★ German Building Permits Post Sharp Decline In May

Germany's building permits experienced another significant decline in May, highlighting the continuing fragility in the construction sector, according to data released by Destatis on Thursday.

Permits for apartment construction plummeted by 24.2 percent in May compared to the same month last year, a steeper drop than the 17.0 percent decrease recorded in April.

Relative to May 2022, the number of building permits fell by 43.9 percent, equating to a reduction of 13,900 apartments.

From January to May, 89,000 apartment permits were approved, marking a 21.5 percent decrease or 24,400 fewer apartments compared to the same period last year.

Destatis reported a 31.5 percent decline in permits for single-family homes and a 15.7 percent drop for two-family homes.

The approval of apartments in multi-family homes, the largest building category, also fell sharply by 21.7 percent.

Earlier this month, the HCOB Purchasing Managers' Index (PMI) survey, compiled by S&P Global, indicated tentative signs of easing in the downturn of Germany's construction sector in June. The construction PMI climbed to 39.7 from 38.5 in May.

Although this score is the highest since August 2023, it remains well below the 50.0 threshold.

HCOB Chief Economist Cyrus de la Rubia noted that construction activity continued its significant decline in June, maintaining a trend observed since spring 2022, though the rate of contraction is decelerating somewhat.

"It appears that the cautious turnaround in interest rates is beginning to have a tangible impact on the construction industry," de la Rubia added.