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Economy in Brief

U.S. Construction Spending Off Sharply
by Tom Moeller May 1, 2008

The value of construction put in place in March fell a more-than-expected 1.1% but February's level was revised up. The latest decline was the fifth in the last six months and the March level was 8.4% below the peak two years ago.

The value of residential building activity cratered 4.6% in March led by a 5.3% (-36.1% y/y) decline in building of single family units. That was similar to the decline in the prior several months. Building activity on multi-family units also slipped 0.5% (-17.0% y/y) and spending on improvements reversed nearly all of the prior month's jump and fell 4.8% (+10.4% 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 jumped 1.9% but three month growth of 9.5% is down from an 18.0% rise last year. A decline in multi-retail building of 2.7% (AR) during the last three months compared with a 14.5% rise last year. A 1.6% 3-month gain in commercial building was down from 13.4% growth last year. Growth in office building remained firm at 13.3% versus 19.6% growth last year.

Growth in public construction over the last three months of 5.0% compared to a 12.2% rise last year. Construction on highways & streets rose at a 10.1% rate during the last three months after last year's rise of 7.4%. (The value of construction on highways & streets is nearly one third of the value of total public construction spending.) Building activity of educational facilities fell at a 3.8% rate after last year's 12.6% rise.

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.

Maps and data that illustrate subprime and alt-A mortgage loan conditions across the United States, from the Federal Reserve, can be found here.

Construction March February Y/Y 2007 2006 2005
Total -1.1% 0.4% -3.4% -2.7% 5.6% 10.7%
Private -1.7% 0.3% -6.7% -6.8% 4.7% 12.0%
  Residential -4.6% 0.2% -19.9% -18.1% 0.5% 13.7%
  Nonresidential 1.9% 0.6% 15.4% 18.0% 15.2% 7.8%
Public 0.6% 0.4% 7.0% 12.2% 9.2% 6.2%
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