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Economy in Brief

U.S. Construction Spending Recovered A Bit
by Tom Moeller September 28, 2007

The value of construction put in place recovered 0.2% last month following a 0.5% drop during July. The rise topped consensus expectations for another decline of 0.5%.

Strength in public construction spending again provided much of the lift to overall construction spending with a 0.7% rise. Construction on highways & streets jumped 0.8% (4.2% y/y). The value of construction on highways and streets is nearly one third of the value of total public construction spending. Construction spending on education gave a real pop with a 1.3% (18.3% y/y) rise.

Nonresidential building jumped 2.3% after a slight dip in July. Office construction surged 3.7% (14.7% y/y) while construction in the commercial sector jumped 2.6% (14.2% y/y). It more than recovered its 1.3% July drop.

Residential building continued on the down slope and fell 1.4%. Building of new single family building fell another huge 3.3% (-25.6% y/y). Spending on improvements recovered from two months of decline with a 1.6% (1.3% y/y) increase.

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.

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.

Globalization, Macroeconomic Performance, and Monetary Policy is yesterday's speech by Federal Reserve Board GovernorFrederic S. Mishkin and it is available here.

  August July Y/Y 2006 2005 2004
Total 0.2% -0.5% -1.7% 5.6% 10.7% 11.0%
Private 0.0% -1.1% -6.1% 4.7% 12.0% 13.8%
  Residential -1.5% -1.7% -16.5% 0.5% 13.7% 18.7%
  Nonresidential 2.3% -0.2% 15.2% 15.2% 7.8% 3.8%
Public 0.7% 1.2% 14.7% 9.2% 6.2% 1.7%
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