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Economy in Brief

U.S. Construction Spending Fell in June, Stable This Year
by Tom Moeller August 1, 2008

The value of construction put in place fell 0.4% during June after having been unchanged in May. The decline was as-expected.Year-to-year construction was down 5.9% but the level of activity so far this year has been roughly stable.

Residential building activity, however, continued to decline in June by 1.8%. Since it's peak it has fallen by more than one-third. Single-family construction continued quite weak as it fell another 3.7% (-39.1% y/y). Building activity on multi-family units edged down 0.4% (-8.0% y/y). Spending on improvements has been edging higher since last November but it's still off 2.0% 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 rose another 0.8% led by a 1.2% (37.9% y/y) jump in lodging spending. Spending on health care facilities rose 0.6% (10.0% y/y) but office construction was roughly unchanged (12.8% y/y).

Public construction fell a slight 0.2%. The y/y gain of 5.2% is down from 12.3% growth last year. Nevertheless, spending on office structures continued quite firm at 26.5% y/y. The value of construction spending on highways & streets was roughly unchanged y/y. (The value of construction on highways & streets is roughly one third of the value of total public construction spending.) Building activity of educational facilities fell 1.5% (+4.2% y/y) during June.

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.

Are Inflation Targets Good Inflation Forecasts? from the Federal Reserve Bank of Chicago is available here.

Construction (%) June May Y/Y 2007 2006 2005
Total -0.4 0.0 -5.9 -2.7 6.3 11.2
Private -0.4 0.0 -9.6 -6.9 5.5 12.7
  Residential -1.8 -1.1 -26.7 -19.8 1.0 14.9
  Nonresidential 0.8 1.1 15.0 19.6 16.2 7.8
Public -0.2 0.1 5.2 12.3 9.3 6.2
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