Wednesday, January 03, 2007

November Construction Spending

by Bill McBride on 1/03/2007 02:21:00 PM

From the Census Bureau: November 2006 Construction at $1,184.1 Billion Annual Rate

There is some good news in this report - nonresidential construction increased in November.

Nonresidential construction was at a seasonally adjusted annual rate of $316.5 billion in November, 1.4 percent above the revised October estimate of $312.0 billion.
Residential construction spending peaked in December 2005, and the typical pattern is for nonresidential construction to peak 3 to 5 quarters after residential construction. Last month I asked if nonresidential construction had peaked in August 2006 - the answer is: no.

The continued decline in residential construction spending was about as expected, and will continue at around this pace, at least through mid-2007, based on housing starts.
Residential construction was at a seasonally adjusted annual rate of $589.3 billion in November, 1.6 percent (±1.3%) below the revised October estimate of $599.0 billion.
The Fed is watching nonresidential construction closely too. From the just released minutes of the Dec 12th FOMC meeting:
Business investment appeared to have decelerated recently, and surveys and orders data pointed to a relatively slow rise in equipment and software spending over the next few quarters. Incoming data on construction activity and employment also suggested that, following very rapid growth earlier in the year, increases in nonresidential construction spending could be moderating considerably.