U.S. Construction Spending Shows Minimal Gain After Earlier Declines

The value of construction put-in-place recovered 0.5% during September following a downwardly-revised 0.2% August down-tick. The figure was slightly better than Consensus expectations for a 0.5% decline for last month. These recent small monthly changes stand in sharp contrast to larger movements earlier in 2010. In fact, sharp declines during prior months have been revised down further -- and the y/y decline of 10.4% is not far from the 2009 contraction rate of 14.9%.

Residential building actually bucked that down-trend last month and rose 1.8%. But that's only after the August decline was revised substantially deeper to 4.2%. Generally, declines recently have started anew after gains from summer of '09 through this April. In the single-family area, September building activity fell 2.6% to leave the y/y change near zero; but spending was off three-quarters from the 2006 peak. Again earlier improvement from last year sputtered beginning this April. In the multi-family building area the story was more dire. September activity did rise 3.3% but that recovered only one-quarter of the August drop and versus last year building was down by 44.3%. Since the 2007 peak activity also fell by three-quarters. Finally, spending on home improvements has been strong as folks fix up homes rather than move away. Activity rose 6.2% in September. That left activity off just 4.6% y/y and by less than one-third from the peak.

In September, nonresidential building fell back by 1.6% after a 0.8% August gain. That left activity down by one-quarter y/y and 38.4% from the early-2008 peak Every sector has seen activity fall sharply during the last twelve months. Lodging fell the hardest, by one-half, with office building close behind with a one-third drop. Building in other areas also was off big with multi-retail down 18.4%, other commercial down 19.6%, and warehouse building off by half. Even education (-17.9% y/y), health care (-12.9%) and religious (-14.1%) felt the downdraft. Transportation building (-5.7%) as well as amusements & recreation (-1.0%) showed lesser declines.

Public construction activity rose 1.3% during September and by the same amount y/y. Power facilities (16.9%), sewerage & waste disposal (14.6%), water supply (5.5%), health care (4.6%) and highways & streets (0.4%) each have shown twelve-month growth, the latter area amounts to one-quarter of the dollars spent on public sector building. Working the other way were commercial (-31.9%), office (-6.9%), and educational building (-4.8%) where growth was negative.

The construction put-in-place figures are available in Haver's USECON database.