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Economy in Brief

U.S. Construction Spending Gains in August, But June & July Revised Down
by Carol Stone October 1, 2009

The headline sounded so promising: construction spending rose 0.8% in August, when forecasters had looked only for a 0.2% decrease. But the pleasure with this result was short-lived. July's amount was revised from -0.2% to -1.1% and June's from a marginal 0.1% increase to a 1.4% fall. Some parts of the economy are improving, but much of construction activity continues to lag. Total outlays in August were 11.6% below a year ago.

Nonresidential projects remain the weakest. Those outlays edged down 0.1% in August, and July was revised from -1.2% to -2.6%, while June's figure was cut back from -2.2% to -4.0%. Over these last 3 months combined, nonresidential outlays dropped by 6.5%; the weakest segments have been lodging, commercial and amusements, each down 12-15%; education (private structures), offices, transportation, manufacturing and communication, down 5-8%, and health care, power and religious construction activity have been flat to somewhat higher. However, as Tom Moeller pointed out here a month ago, these declines result mainly from poor business profits during the worst of the recession; planning and building lead-times mean that recent work reflects those discouraging business conditions from at least several months ago or more. Now profits are improving and recovery in the residential sector seems to be more firmly established. So the implications for sustained turnaround in nonresidential construction are much more positive now.

Public construction was down in August by 1.1%, as federal building activity fell 7.6%, while state and local government outlays decreased 0.5%. Increases over previous months mean that the year-on-year comparison still shows a gain, this of 3.3%.

Construction (%) August July June Y/Y 2008 2007 2006
Total 0.8 -1.1 -1.4 -11.6 -6.9 -1.6 6.3
Private 1.8 -1.4 -3.2 -17.8 -11.1 -5.7 5.5
  Residential 4.7 0.6 -1.8 -26.7 -29.1 -19.7 1.0
  Nonresidential -0.1 -2.6 -4.0 -10.5 13.2 23.1 16.2
Public -1.1 -0.7 2.2 3.3 5.6 13.1 9.3
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