Construction Industry Returns to Growth

Abstract

Following five years of crisis, construction output will grow in real terms again in 2026, increasing by 1.7 percent. Next year, growth could reach nearly 3.5 percent. Public construction is driving this recovery. Real public construction volume is expected to grow by 6.7 percent in both 2026 and 2027. The reason for this strong expansion is the gradual increase in spending from the Special Fund for Infrastructure and Climate Neutrality. However, residential and commercial construction will most likely remain stagnant in 2026. Nevertheless, these sectors should see substantial real output growth next year. Looking ahead, the billions in subsidies will fall short of sustainably improving Germany’s infrastructure and housing supply unless the construction industry becomes more productive. Therefore, what is urgently needed is solid empirical research into the causes of the current productivity slump, followed by a coordinated initiative from policymakers and the construction industry to boost productivity.