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Economy in Brief

U.S. Construction Spending Declined Again
by Tom Moeller September 4, 2007

The value of construction put in place fell 0.4% after a 0.1% increase in July. Consensus expectations had been for no change. Year-to-year, the value of total construction has been up 2.0%, but all of the increase has been due to a gain in public construction.

Residential building was down a sharp 1.4%. New single family building fell a whopping 2.2% and brought the y/y decline in activity to 25.3%. Spending on improvements softened the decline with just a 0.1% dip and increased y/y by 2.4%.

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 increased 0.4% for the second consecutive month. The gain lifted y/y gain in activity to 15.4%. Office construction rose 0.6% (10.4% y/y) and construction in the commercial sector popped 1.0% (15.0% y/y) led by a 4.1% rise in multi-retail building (15.7% y/y).

Public construction spending increased 0.7% (12.7% y/y). Though construction on highways & streets fell 4.3% in July, the year-to-year gain amounts to 59.2%. The value of construction on highways and streets is nearly one third of the value of total public construction spending.

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.

  July June Y/Y 2006 2005 2004
Total -0.4% 0.1% 2.0% 5.6% 10.7% 11.0%
Private -0.7% -0.2% -6.0% 4.7% 12.0% 13.8%
  Residential -1.4% -0.6% -16.1% 0.5% 13.7% 18.7%
  Nonresidential 0.4% 0.4% 15.4% 15.2% 7.8% 3.8%
Public 0.7% 1.0% 12.7% 9.2% 6.2% 1.7%
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