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Economy in Brief

U.S. Construction Spending Up Unexpectedly
by Tom Moeller October 2, 2006

The August value of construction put in place rose a modest 0.3% after a little revised 1.0% drop during July. Consensus expectations had been for a 0.4% decline. Despite the latest increase the level of 3Q activity remained 1.0% below 2Q.

Residential building dropped another 1.4%, the fifth sharp slide in as many months. New single family building dropped 2.7% (-9.3% y/y) and the August level was down 12.5% from the peak in February. Moving in the other direction the value of spending on improvements rose 1.1%% (0.8% 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.

Nonresidential building jumped 3.4% after an upwardly revised 1.3% July rise. Office construction surged 3.1% (27.5% y/y) while multi-retail building jumped 10.8% (51.1% y/y). Building by the factory sector surged 8.2% (28.4% y/y) to the highest level since 2001.

Public construction spending reversed all of the prior month's revised decline with a 1.1% increase due to across the board gains. Construction activity on highways & streets, nearly one third of the value of public construction spending, rose 0.4% (17.6% y/y).

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.

Are Investors More Risk-Averse During Recession? from the Federal Reserve Bank of St. Louis can be found here.

Construction Put-in-place August July Y/Y 2005 2004 2003
Total 0.3% -1.0% 4.5% 10.7% 11.5% 5.6%
Private 0.1% -1.0% 2.9% 12.0% 14.3% 6.4%
  Residential -1.4% -2.2% -5.1% 13.9% 18.6% 12.8%
  Nonresidential 3.4% 1.3% 23.8% 7.4% 5.3% -4.8%
Public 1.1% -1.2% 9.7% 6.2% 2.8% 2.9%
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