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Economy in Brief

U.S. Construction Spending Down Again
by Tom Moeller June 2, 2008

The value of construction put in place fell for the seventh consecutive month in April. The 0.4% decline was about as-expected and the March decline of 0.6% was half that reported initially. Nevertheless, the value of total construction was down 8.6% since its peak in early 2006.

A 2.3% decline in the April value of residential building activity led last month's decline in the total, and since its peak it has fallen by more than one-third. The 37.4% decline was paced by lower building of single family units; down 4.4% in April and by 3.0% to 5.4% in each of the prior eight months. Building activity on multi-family units increased 0.4% (-12.5% y/y) for the second straight month while spending on improvements fell 0.5% (+7.5% 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.

The value of nonresidential building activity surged again for the third straight month. The 1.6% increase was led by a 7.6% (45.4% y/y) jump in lodging and a 1.0% (19.4% y/y) increase in the education category. Growth in office building remained firm though it posted only a 0.5% (15.0% y/y) increase during April. Growth in multi-retail building eased. A 2.1% gain during April failed to make up the declines during the prior few months and spending was down 4.1% y/y.

Public construction slipped 0.3% after a 1.0% March surge. Public sector nonresidential building slipped 0.5% but it still was up 7.0% y/y. The value of construction spending on highways & streets ticked up 0.1% (5.2% y/y) after strong gains during the prior two months. (The value of construction on highways & streets is roughly one third of the value of total public construction spending.) Building activity of educational facilities rose 7.3% from a year earlier and nonresidential office building surged 26.4% y/y.

The more detailed categories of construction 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 April March Y/Y 2007 2006 2005
Total -0.4% -0.6% -3.9% -2.7% 5.6% 10.7%
Private -0.5% -1.1% -7.2% -6.8% 4.7% 12.0%
  Residential -2.3% -3.0% -21.0% -18.1% 0.5% 13.7%
  Nonresidential 1.6% 1.2% 15.4% 18.0% 15.2% 7.8%
Public -0.3% 1.0% 6.8% 12.2% 9.2% 6.2%
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