Global| Sep 02 2008U.S. Construction Spending Fell in July
by:Tom Moeller
|in:Economy in Brief
Summary
The value of construction put in place fell 0.6% during July and that reversed the 0.3% increases during the prior two months. The decline was as-expected. Year-to-year, construction was down 4.8% but the level of activity so far this [...]
The value of construction put in place fell 0.6% during July and that reversed the 0.3% increases during the prior two months. The decline was as-expected.
Year-to-year, construction was down 4.8% but the level of activity so far this year continued roughly stable.
As in prior months, however, residential building activity continued to decline sharply, by 2.1% in July. Since it's peak it has fallen by just over one half. Single-family construction dropped an even larger 3.7% (-0.9% y/y) in July and that level is off by nearly two-thirds from its peak in early 2006. Building activity on multi-family units ticked up 0.2% (-1.7% y/y) while spending on improvements gave back the June gain and fell 1.0% (-5.5% 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 fell 0.7% after increasing in each month of this year. Despite the latest dip, office construction continued firm and increased 1.7% (13.7% y/y). Lodging spending dipped, however, by 0.1% but it was up by more than one-third from last year's level. Spending on multi-retail building rose 3.1% (4.7% y/y) while spending on health care facilities dipped 0.2% (+6.7% y/y).
Public construction continued firm and rose by 1.4% (8.1% y/y). The value of construction spending on highways & streets fell modestly for the third consecutive month but remained up 6.9% from last year. (The value of construction on highways & streets is roughly one third of the value of total public construction spending.) Building activity of educational facilities surged 2.5% (7.4% y/y) during July.
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.
The United States in the International Financial System: A Separate Reality? Resolving Two Puzzles in the International Accounts is yesterday's speech by Fed Governor Randall S. Kroszner and it can be found here.
Regional Variation in the Potential Economic Effects of Climate Change from the Federal Reserve Bank of San Francisco is available here.
| Construction (%) | July | June | Y/Y | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Total | -0.6 | 0.3 | -4.8 | -2.7 | 6.3 | 11.2 |
| Private | -1.4 | 0.2 | -9.2 | -6.9 | 5.5 | 12.7 |
| Residential | -2.3 | -1.4 | -27.5 | -19.8 | 1.0 | 14.9 |
| Nonresidential | -0.7 | 1.7 | 16.0 | 19.6 | 16.2 | 7.8 |
| Public | 1.4 | 0.4 | 8.1 | 12.3 | 9.3 | 6.2 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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