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Economy in Brief

U.S. Construction Spending Down
by Tom Moeller November 1, 2006

The value of construction put in place fell 0.3% during September after a slight decline the prior month which was downwardly revised. Consensus expectations had been for a 0.1% gain and it was the third decline in three months.

Residential building dropped another sharp 1.1%, the sixth decline in as many months. New single family building fell an even harder 2.5% (-12.8% y/y) however spending on improvements rose 1.0%% (2.8% y/y) and recovered after two months of little change.

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.

Slowdown in Housing Won’t Shut Down Economic Growth from the Federal Reserve Bank of St. Louis can be found here.

Nonresidential building inched up 0.1% after a little revised 3.1% surge during August. Lodging jumped 2.8% (61.7% y/y) and office construction tacked on another 0.8% (28.0% y/y) to earlier monthly gains which ranged between two and eight percent. Multi-retail building boomed another 2.2% (44.8% y/y) though building by the factory sector slipped 0.6% (+22.2% y/y) after a 7.9% surge the prior month.

Public construction spending rose 0.9% but a previously reported 1.1% August increase was revised to just 0.3%. The 1.7% (+13.2% y/y) monthly decline in construction activity on highways & streets, nearly one third of the value of public construction spending, was the fourth in a row.

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.

The great turn-of-the-century housing boom from the Federal Reserve Bank of Chicago is available here.

Construction Put-in-place September August Y/Y 2005 2004 2003
Total -0.3% -0.0% 2.9% 10.7% 11.5% 5.6%
Private -0.7% -0.1% 0.6% 12.0% 14.3% 6.4%
  Residential -1.1% -1.6% -6.9% 13.9% 18.6% 12.8%
  Nonresidential 0.1% 3.1% 19.2% 7.4% 5.3% -4.8%
Public 0.9% 0.3% 11.6% 6.2% 2.8% 2.9%
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