Real estate construction boom comes to an end – Official data show significant decline

To be fair, we have to say that the construction boom in Germany in recent years was gigantic. Real estate prices were booming. For years there have been gigantic growth rates in construction! This could not go on forever. Last Thursday, the Purchasing Managers’ Index (PMI) for the construction industry showed a further slide into negative territory for the month of August – an extremely negative signal! From July to August it dropped from 49.5 to 46.3 index points. All values below 50 show declining activity.

Today, the Federal Statistical Office published the official data for the month of June for turnover in the construction industry. So let’s take a two-month look back at the industry’s data – while the PMI shows the current situation. In June, sales fell by 3.3% year-on-year. As weak as the PMI was last week for August – can we then assume that actual sales in July and August will be even worse than today for the month of June? Was that the boom in real estate? At any rate, the construction boom is over when you look at these data.

A glance at the detailed data shows that the sub-sectors of the construction industry in particular are even more in the red than the average for the construction of real estate. The construction of buildings is down by 4.3%. Roofing shows a minus of 4.2%. On the other hand, we see, for example, an increase of 2.6% in the area of “underground pipeline construction and sewage treatment plant construction”. If we look at the comparison of a larger period, namely January-June 2019 in relation to January-June 2018, then the total turnover in the construction industry is still full in the plus with 8.3%. So it is a negative development that is just beginning.

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