by Bill McBride on 12/03/2012 11:27:00 AM
Monday, December 03, 2012
Three key construction spending themes:
• Residential construction is usually the largest category for construction spending, but there was a huge collapse in spending following the housing bubble (as expected). Looking forward, private residential construction spending will be the largest category again very soon - but spending is still very low (at 1998 levels not adjusted for inflation).
• Private non-residential construction spending picked up last year mostly due to energy spending (power and electric), but spending on office buildings, hotels and malls is still very low.
• Public construction spending declined for several years, but the decline appears to be mostly over. Note: Public construction spending is mostly state and local spending, and the drag from state and local cutbacks appears to be ending.
The Census Bureau reported that overall construction spending increased in October:
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during October 2012 was estimated at a seasonally adjusted annual rate of $872.1 billion, 1.4 percent above the revised September estimate of $860.4 billion. The October figure is 9.6 percent above the October 2011 estimate of $795.7 billion.Both private and public construction spending increased:
Spending on private construction was at a seasonally adjusted annual rate of $592.1 billion, 1.6 percent above the revised September estimate of $582.7 billion. ... In October, the estimated seasonally adjusted annual rate of public construction spending was $280.1 billion, 0.8 percent above the revised September estimate of $277.7 billion.Click on graph for larger image.
This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.
Private residential spending is 57% below the peak in early 2006, and up 32% from the post-bubble low. Non-residential spending is 28% below the peak in January 2008, and up about 31% from the recent low.
Public construction spending is now 14% below the peak in March 2009 and just above the post-bubble low.
The second graph shows the year-over-year change in construction spending.
On a year-over-year basis, private residential construction spending is now up 21%. Non-residential spending is also up 11% year-over-year mostly due to energy spending (power and electric). Public spending is down 1% year-over-year.