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Economy in Brief

U.S. Construction Spending Off Again
by Tom Moeller January 3, 2007

The value of construction put in place in November fell 0,2% though the prior month's sharp drop was revised to more mild 0.3% dip. Nevertheless, it was the sixth decline in the last seven months. Consensus expectations had been for a 0.5% November decline.

Residential building again fell sharply. The 1.6% decline was the eighth consecutive monthly decline and it lowered the level of residential construction activity 11.3% below last December's peak. New single family building dropped 3.1% after a 3.8% slip during October and it lowered activity 20.8% below the peak this past February. Spending on improvements again made up for some that lost work and rose 0.6% (6.7% 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.

Housing: Boom or Bubble? from the Federal Reserve Bank of Philadelphia is available here.

Nonresidential building rose 1.4% after an upwardly revised 0.5% October uptick. Lodging construction surged 3.9% (71.4% y/y) after a 7.8% October spike and office construction rose a solid 1.0% (30.9% y/y) after an upwardly revised October gain. Multi-retail building eased 0.6% (28.3% y/y) and gave back half of October's increase.

Public construction spending increased 1.0% after an upwardly revised 1.9% October surge. Spending on highways & streets, nearly one third of the value of public construction spending, ticked up 0.4% (13.7% y/y) but October's gain was revised up to 2.5%.

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 November October Y/Y 2005 2004 2003
Total -0.2% -0.3% 0.1% 10.7% 11.5% 5.6%
Private -0.6% -1.0% -2.7% 12.0% 14.3% 6.4%
  Residential -1.6% -1.7% -11.1% 13.9% 18.6% 12.8%
  Nonresidential 1.4% 0.5% 18.0% 7.4% 5.3% -4.8%
Public 1.0% 1.9% 10.6% 6.2% 2.8% 2.9%
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