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October 11, 2016

Germany’s wood industry achieved a considerable growth in the first half of the year

Germany’s wood industry achieved a considerable growth in the first half of the year

The German wood industry looks back on a successful first half-year 2016. Compared to the same period of the previous year, a strong revenue growth of 4.3% to € 17.4 billion (2015: € 16.7 billion) was achieved. As a result, the sector's economy has accelerated considerably, as the turnover of the industry in the comparable period of 2015 was only 1.5%.

In the German wood industry, a total of 148,982 men and women were employed by 941 companies in the first half of 2016. Compared to the same period of the previous year, the number of companies declined by 0.8%, but the number of employees increased by 0.7%.

The main reason for the significant revenue growth is the considerable increase in German construction activity - not least due to immigration - which is due to good economic conditions and unchanged low interest rates. Most of the German companies depend directly or indirectly on the construction industry, either because they produce buildings, supply building materials or set up the finished living space. In the multi-family home construction, the number of apartments approved in the first half of 2016 increased by 30.7% to more than 80,000. In the new building sector of one- and two-family houses, the number of houses rose significantly by 12.6% to just under 56,000.

The most direct and most positive impact is attributable to the so-called "construction sector" segment. This includes manufacturers of prefabricated houses, windows, doors, staircases and other building elements. Sales in the first half of 2016 grew by 12.8% year-on-year to over € 2.5 billion.

Prefabricated construction sector has a special weight in the German industry. In the first half of 2016, prefabricated buildings are significantly better off with a building permit of 16.7% than the total building market (12.6% increase). In total, almost 56,000 detached and two-family houses were approved from January to June of the current year, of which almost 9,500 were in prefabricated construction. The nationwide share of prefabricated buildings thus rose to a new half-yearly record value of 17%. In some regions, this share is even considerably higher. The best value among the surface countries reached Hesse with a value of 29.1%. As in Baden-Württemberg, more than one in four houses is being constructed in prefabricated buildings sector (28.2%).

The German industry plays a very important role due to the CO2-neutral material of wood in one of the greatest political challenges: the federal government is striving to build a climate-friendly building stock by 2050. To achieve this goal, it is indispensable, from an ecological point of view, to exploit the CO2 storage effect of wood products much more strongly to promote the building with wood. For example, at least one-third of the public building contracts should be made binding in timber construction.

If Germany wants to achieve their CO2 targets, this can only be done using wood and to provide enough wood to the economy.

Wood construction is the key for adaptive and future-oriented living space concepts. It is ideally suited for the re-compacting of urban residential areas, especially for multi-storey buildings and additions.

Unfortunately, however, timber construction is still at a disadvantage in many federal states. According to a study by the Thünen Institute in Hamburg, this is the case in 5 out of 16 federal states. The reason for this is the fact that obstacles to timber construction which have long since been overtaken are still being passed on in the relevant state building regulations. In other federal states these regulations have long been adapted to the state of the art, so that equal opportunities are achieved against conventional construction methods.

Baden-Württemberg is the best example of this rethinking. Here, the technical possibilities of modern timber construction were taken into account early on in their state building regulations and thus assumed an exemplary role. Other states, such as Rhineland-Palatinate, have now followed suit. From Germany’s point of view, it is highly sensible to reduce the legal barriers to timber construction as quickly and as far as possible. Germany therefore demands the simplest way: they expect the regulations from Baden-Württemberg and Rhineland-Palatinate to be incorporated into the model building regulations of the Confederation and other regional building regulations. Such harmonization would also simplify licensing procedures for all types of construction and make building easier, more unbureaucratic, faster and more cost-effective.

The second-largest segment of the timber industry - the wood-based materials industry - recorded a slight increase in sales of 1.2% too around € 2.5 billion. As a supplier to the building sector and the furniture industry, the sawmills strongly participate in the sales growth there and therefore recorded a substantial increase of 3.3% to € 2.1 billion in the first half of the year. Demand for wood packaging is also rising: from January to June 2016, the official figures show an increase in sales of 4.4% to over  € 330 million. The small segment of "other wood products" (ie wood finishing and cork, wicker and wicker) recorded a sales decline of 39.1% to around 240 million €. On a positive note, brushes and brushes increased by 12.2% to € 430 million.

The pleasing figures for the furniture sector have had a positive effect on the good half-year result. In the first half of the year, the revenues of the furniture manufacturers rose by 4.9% to € 8.9 billion, significantly higher than the level of the previous year and above the expectations of our industry at the beginning of the year. The furniture manufacturers are the single-sector and top-selling individual sector in the wood industry.

Germany’s entire branch of industry is mainly located in rural areas. With their medium-sized structures, the country’s companies contribute to the vitality of rural areas. They therefore have a high demographic and political responsibility, since about 90% of Germany's area is rural. However, the prerequisites for viable industrial production have not yet been given everywhere. The highly skilled artisan industry will increasingly depend on the possibilities of digitalization. However, a lack of IT infrastructure is still at a disadvantage, especially in international competition.

For the second half of 2016, there are still positive conditions. The economic research institutes expect a continuation of the "moderate upswing" in Germany. Interest and unemployment remain low. However, we believe that the development of our industries will slow down significantly. Thus, consumers and entrepreneurs are becoming increasingly unsettled by the established Brexit and the numerous crises around the world. Expectations for economic development in Europe and Germany are falling. Several renowned business institutes have already slightly lowered the forecast for this year's gross domestic product in Germany.

This also corresponds to the perception of the company. The current Ifo business cycle test shows in the factories of the wood industry that the current business situation is highly positive. Expectations for the next six months, however, go back month after month; In August the expectation indicator even landed for the first time in the previous year under zero. It is particularly noteworthy - and an indicator of the best behavioral development - that the assessment of foreign orders is also zero in August.

For the full year 2016, Germany therefore expects a growth in sales of around 3% for the entire wood industry.

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