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Economy in Brief

U.S. Construction Spending Fell. All Categories Down
by Tom Moeller March 3, 2008

The value of construction put in place fell 1.7% during January, roughly repeating its little revised 1.3% December downdraft. The latest decline was the forth consecutive monthly drop but the last two were by far the largest of the bunch. Activity during the opening month of 2008 was 1.7% below the 4Q07 average. A 0.7% decline had been generally expected in January construction activity.

For the first month since late 2006, the value of nonresidential building activity fell. Building in the lodging area fell 3.0% (+55.1 y/y) and roughly repeated its downwardly revised 2.7% December decline. Office construction rose a modest 0.7% (7.1% y/y) but a previously reported large December gain was revised away. Multi-unit retail (shopping malls) fell 2.3% (+1.6% y/y).

Growth in the nonresidential area continued with a 2.1% (21.8% y/y) rise in education. Spending in the factory sector ticked up 0.1% (31.7 y/y) after little revised, very strong gains during the prior four months. Spending in the transportation area fell 0.8% (+15.2% y/y) and spending in the health care industry fell 1.0% (+4.8% y/y).

Private construction in total fell another 2.2%, pulled down further by a 3.0% drop in residential building, the largest since last October. Construction activity on new single family units tumbled 5.2% (-32.1% y/y), about the rate of decline as during the prior five months. Building activity on multi-family units also fell a sharp 1.7% (-18.6% y/y) while spending on improvements ticked down 0.2% (+5.2% y/y).

Housing and the "R" Word from the Federal Reserve Bank of St. Louis can be found here .

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.

Public construction spending fell slightly, by 0.2%. Construction on highways & streets fell 1.3% (+0.9% y/y) for the third consecutive monthly decline. The value of construction on highways & 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.

Construction January December Y/Y 2007 2006 2005
Total -1.7% -1.3% -3.3% -2.7% 5.6% 10.7%
Private -2.2% -1.3% -6.4% -6.8% 4.7% 12.0%
  Residential -3.0% -2.6% -19.7% -18.1% 0.5% 13.7%
  Nonresidential -1.2% 0.4% 17.3% 18.0% 15.2% 7.8%
Public -0.2% -1.6% 6.6% 12.3% 9.2% 6.2%
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