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Economy in Brief

U.S. Construction Spending Off Again
by Tom Moeller January 31, 2007

The value of construction put in place in December fell 0.4% after an upwardly revised 0.1% November uptick. Consensus expectations had been for no change.

For the full year, construction spending grew 4.8%, the weakest since 2002 after 2005's 10.7% surge.

Residential building continued it's recent rate of decline, despite warmer temperatures, and fell 1.6%. New single family building dropped 2.2% after a 3.o% slide during November and it lowered activity 22.2% below the peak this past February. Spending on improvements also slipped 0.2% (+7.8% 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 rose 0.9% after an unrevised 1.4% November jump. Office construction surged 1.4% (22.1% y/y) and multi-retail building soared 4.1% (21.4% y/y).

Public construction spending rose 0.6%. Spending on highways & streets, nearly one third of the value of public construction spending, fell 1.1% (+9.6% 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.

Construction Put-in-place December November Y/Y 2006 2005 2004
Total -0.4% 0.1% -1.4% 4.8% 10.7% 11.5%
Private -0.8% -0.5% -4.6% -4.6% 12.0% 14.3%
  Residential -1.6% -1.4% -12.5% -1.7% 13.9% 18.6%
  Nonresidential 0.9% 1.4% 14.5% 16.2% 7.4% 5.3%
Public 0.6% 2.2% 10.5% 10.2% 6.2% 2.8%
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