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Economy in Brief

U.S. Construction Spending Off Again
by Tom Moeller July 3, 2006

The value of construction put in place fell another 0.4% in May following a little revised 0.2% slip during April. Consensus expectations had been for a 0.2% gain and revisions to the data extended back to January 2003.

Lower residential building activity led the decline during May with a 0.8% drop. New single family building fell a notable 1.7% (+3.7% y/y) after a similar drop the month prior. Spending on multi-family projects slipped a more moderate 0.5% (+23.1% y/y) while the value of spending on improvements jumped 1.8% (-6.8% y/y).

During the last twenty years there has been an 84% correlation between the q/q change in the value of residential building and its contribution to growth in real GDP. During April and May the value of residential building activity was down 1.3% from the 1Q average.

Nonresidential building slipped 0.3% following downwardly revised during prior months but the 2Q level so far is up 3.1% from the prior quarter. Office construction added 0.2% to the 2.5% surge during April (8.8% y/y) and commercial building slipped 0.8% (+5.4% y/y). Multi-retail building jumped another 5.1% (36.9% y/y) as building activity at shopping malls (39.3% y/y) and shopping centers (57.7% y/y) was firm.

Public construction spending increased 0.7% though construction activity on highways & streets, nearly one third of the value of public construction spending, rose just 0.1% (16.3% y/y) after several months of strong gain.

These more detailed categories represent the Census Bureau’s reclassification of construction activity into end-use groups. Finer detail is available for many of the categories; for instance, commercial construction is shown for Automotive sales and parking facilities, drugstores, building supply stores, and both commercial warehouses and mini-storage facilities. Note that start dates vary for some seasonally adjusted line items in 2000 and 2002 and that constant-dollar data are no longer computed.

Construction Put-in-place May April Y/Y 2005 2004 2003
Total -0.4% -0.2% 6.0% 10.7% 11.5% 5.6%
Private -0.6% -0.3% 5.3% 12.0% 14.3% 6.4%
  Residential -0.8% -1.2% 2.4% 13.9% 18.6% 12.8%
  Nonresidential -0.3% 1.6% 12.7% 7.4% 5.3% -4.8%
Public 0.7% 0.5% 8.7% 6.2% 2.8% 2.9%
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