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Economy in Brief

U.S. Construction Spending Supported By Nonresidential
by Tom Moeller August 1, 2006

The value of construction put in place rose 0.3% in June following a slight May decline that was upwardly revised. Consensus expectations had been for a 0.1% increase.

Another strong gain in nonresidential building, up 2.7%, bolstered the June total. Office construction jumped 1.9% (12.6% y/y) while multi-retail building surged another 3.1% (52.5% y/y) and a 10.5% spike during May was double the initial estimate. Building by the factory sector surged 8.1% (34.7% y/y).

Residential building activity fell for the third straight month. The 1.0% decline was led by 2.1% drop in new single family building (-1.2% y/y). That's the first y/y decline since late 2000. Spending on multi-family projects ticked up 0.1% (14.7% y/y) while the value of spending on improvements jumped 1.6% (-1.6% y/y) but the prior month's surge was revised away.

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.

Public construction spending increased 0.8%. Construction activity on highways & streets, nearly one third of the value of public construction spending, rose just 0.1% (19.7% y/y) but the prior month's 0.1% gain reported initially was revised to a 4.3% surge.

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 June May Y/Y 2005 2004 2003
Total 0.3% -0.0% 6.8% 10.7% 11.5% 5.6%
Private 0.1% -0.5% 6.0% 12.0% 14.3% 6.4%
  Residential -1.0% -1.4% -0.1% 13.9% 18.6% 12.8%
  Nonresidential 2.7% 1.6% 21.6% 7.4% 5.3% -4.8%
Public 0.8% 1.6% 9.7% 6.2% 2.8% 2.9%
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