300 international industry leaders, economists, association representatives, and experts from the Central European forestry and timber industry gathered for International Wood Day.

From a special boom to a harsh reality: The macroeconomic analysis of the European timber industry was the focus of International Wood Day. There was little sign of cautious hope, but all the more of strategic perseverance and a clear assessment of the current situation: On Friday, September 4, 2026, approximately 300 international industry decision-makers, economists, association representatives, and experts from the Central European forestry and timber industry gathered at the Klagenfurt Exhibition Center.

The key message: While the long-term role of wood as a central component of climate protection remains undisputed, the combination of a deepening industrial recession, a sluggish construction sector, and regulatory hurdles such as the EU Deforestation Regulation (EUDR) demands extreme flexibility and perseverance from companies.

The Central European forestry, sawmilling, and wood processing industry has experienced several years of immense macroeconomic turbulence. Following the historic booms and record profits of 2021 and 2022—driven by unprecedented global demand for construction and disrupted supply chains—the subsequent monetary tightening by central banks has plunged the European construction sector into one of the most severe crises of the postwar era.

Gunter Deuber, Chief Economist at Raiffeisenbank International AG, provided the attending executives, association representatives, and industry decision-makers from the forestry and timber sectors with an unvarnished, scientifically sound, and empirically supported assessment of the macroeconomic landscape. In his keynote address, which lasted about an hour, the chief economist presented a detailed analysis of the economic situation in Central Europe.

The analysis was structured around four central, closely intertwined themes: the entrenched industrial recession in the core European market, the structural consumption paradox among private households, the medium-term interest rate and financing outlook, and the urgent economic policy adjustments needed to secure the region’s competitiveness.
 
Deepening Industrial Recession in the Core Market of Europe

Deuber began by noting that the European economic area is experiencing a drastic geographical and sectoral divide. While some economies in Southern and Southeastern Europe (such as Spain or parts of the Balkan region) are experiencing moderate growth thanks to robust service sectors and EU reconstruction aid, the industrial heartland of the continent is mired in a deep-rooted and entrenched recession. Germany’s persistent structural weakness is a particular cause for concern. As by far the most important trading partner of the Austrian wood industry, the German economy traditionally serves as an economic engine for the entire Alps-Adriatic and CEE regions.

If this engine stalls, Central European sawmills, panel manufacturers, and timber construction companies will feel the impact immediately. While the slump in private and commercial building activity in Germany and Austria has, in purely mathematical terms, bottomed out, there is still no sign of a noticeable recovery. The number of building permits remains at historic lows, and cancellations in residential construction are still the order of the day.

Deuber warned against expecting a rapid V-shaped recovery—anyone who bases their business plans on the hope that sales volumes from 2021/2022 will return anytime soon is failing to take the harsh macroeconomic realities into account. The return of overall economic output to the pre-crisis level of 2022 will be a protracted process spanning several years.

Economists at Raiffeisen Research expect that this level will not be sustainably reached again until gradually in 2026 and 2027. For the wood industry, this means that capacity utilization management at sawmills and capacity discipline will remain the decisive factors for survival for the foreseeable future.
 
The Consumption Paradox and the Record-High Savings Rate

A central focus of Deuber’s remarks was a detailed examination of private households and their spending behavior. In theory, the purchasing power of consumers in Austria and Germany is not considered all that bad: Following the years of high inflation, recent collective bargaining agreements and wage settlements have led to noticeable increases in real wages. Households have more disposable income in nominal terms than they did two years ago. Nevertheless, this increase in income is not being felt in either the retail sector or the construction sector.

Deuber described this situation as a pronounced “consumption paradox.” Instead of injecting the additional disposable income into the economic cycle, citizens are hoarding their capital in the bank. Savings rates in Austria and Germany remain at historically extremely high levels, the likes of which are otherwise only seen during periods of acute geopolitical or economic crisis fears. This collective uncertainty strikes the wood industry where it is most vulnerable: in private home ownership and residential construction. The single-family home—for decades the reliable main customer for sawn timber, roof trusses, glued laminated timber, and interior finishing products—has become a distant prospect for broad segments of the population.

In addition to rising construction costs and the unclear political framework surrounding building energy laws, strict lending guidelines are also acting as a major obstacle. Many families who have the necessary equity and theoretical creditworthiness are postponing their “home-building” projects indefinitely or canceling them altogether. The lack of this broad base of private demand cannot currently be offset by public or commercial construction.
 
Interest Rate Landscape and Credit Conditions: The End of Free Financing

Following the sharp wave of interest rate hikes in 2022–2023, the ECB did indeed reverse course and began a cycle of key interest rate cuts to counteract the weak momentum in the industrial sector. However, Deuber tempered any euphoria regarding the scope of these measures. He made it clear that interest rate cuts should not be equated with a return to a flood of cheap money.

The ECB aims to stabilize its key interest rates within a so-called “neutral range”—a level that neither stimulates the economy excessively nor slows it down significantly. For project developers, real estate developers, and private homebuilders, this means that the era of zero or negative interest rates—which had artificially inflated the construction sector over the past decade—is definitively over.

Loans for real estate and infrastructure projects will remain consistently more expensive compared to the decade prior to 2022. Investors and banks are once again demanding higher equity ratios and a more conservative approach to risk assessment. All business models in the timber industry that were based on extremely cheap debt financing for construction projects must be fundamentally recalculated.
 
Recommendations for Policy Makers and the Timber Industry

The banker spoke out strongly against broadly distributed government subsidies, which often fizzle out without having a lasting impact. Instead, he said, the economy needs targeted instruments that create incentives. He advocated for time-limited investment incentives for new eco-friendly buildings and comprehensive energy-efficient building renovations. Only if the government creates incentives that mobilize private capital can the bottleneck in the construction sector be resolved.

Deuber issued a stark warning against a spiral of drastic increases in labor costs without corresponding gains in productivity. Since the Austrian and German wood industries are highly export-oriented, excessive increases in wages and ancillary costs lead to a direct competitive disadvantage compared to producers from Scandinavia, Eastern Europe, or North America.

As an energy- and logistics-intensive industry, wood processing suffers greatly from the high energy prices in Central Europe compared to international standards. Deuber called on policymakers to halt the deindustrialization of core Europe through targeted relief on energy taxes and grid fees, and to provide manufacturing companies with planning certainty.

Conclusion and Outlook
The key message for the wood industry is this: The sector must prepare for a prolonged period of consolidation, during which corporate success will be determined not by volume growth, but by operational efficiency, the depth of value creation, and the development of new export markets outside Europe. The long-term megatrends—climate protection, the decarbonization of the construction sector, and the circular economy—continue to speak unequivocally in favor of wood as a material.

However, in order to reap the benefits of this green transformation, the industry must navigate the macroeconomic lean years ahead with cool-headed calculation and strict cost and capacity discipline.

Source: lko.at