Germany is getting a bit bubbly as regards domestic construction. This shouldn’t be surprising, given that longer dated bunds (even the 10yr) are negative on a real ex-post basis, i.e., using historical measures of inflation.
Note: I re-scaled the volume-adjusted indices to 2001=100 to fully capture the bubble in countries like Spain – the bubble illustration wouldn’t be quite as obvious with Eurostat’s index to 2005. Furthermore, the chart illustrates the monthly construction, while some countries, like Greece or Ireland, for example, list construction solely on a quarterly basis. Eurostat simply estimates construction in these countries to produce the Euro area aggregate on a monthly basis.
Going forward, this construction data does give real-time evidence that the German economy is moving marginally toward domestic-led growth….or we’re seeing the outset of a bubble in German construction.