Monday, February 02, 2015

Construction Spending increased 0.4% in December

by Bill McBride on 2/02/2015 11:07:00 AM

The Census Bureau reported that overall construction spending increased in December:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during December 2014 was estimated at a seasonally adjusted annual rate of $982.1 billion, 0.4 percent above the revised November estimate of $978.6 billion. The December figure is 2.2 percent above the December 2013 estimate of $961.2 billion. ... The value of construction in 2014 was $961.4 billion, 5.6 percent above the $910.8 billion spent in 2013.
Both private and public spending increased in December:
Spending on private construction was at a seasonally adjusted annual rate of $698.6 billion, 0.1 percent above the revised November estimate of $698.2 billion. ...

In December, the estimated seasonally adjusted annual rate of public construction spending was $283.5 billion, 1.1 percent above the revised November estimate of $280.4 billion.
emphasis added
Note: Non-residential for offices and hotels is increasing, but spending for oil and gas is generally declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for lodging is up 18% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 8% year-over-year (and will fall further in the coming months).

Private Construction Spending 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 48% below the peak in early 2006 - but up 53% from the post-bubble low.

Non-residential spending is 16% below the peak in January 2008, and up about 55% from the recent low.

Public construction spending is now 13% below the peak in March 2009 and about 9% above the post-recession low.

Private Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is down 4%. Non-residential spending is up 5% year-over-year. Public spending is up 7% year-over-year.

Looking forward, all categories of construction spending should increase in 2015. Residential spending is still very low, non-residential is starting to pickup (except oil and gas), and public spending has probably hit bottom after several years of austerity.

This was below the consensus forecast of a 0.6% increase, however there were some minor upward revisions to spending in October and November.