Monday, March 02, 2015

Construction Spending decreased 1.1% in January

by Bill McBride on 3/02/2015 11:01:00 AM

The Census Bureau reported that overall construction spending decreased in January:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during January 2015 was estimated at a seasonally adjusted annual rate of $971.4 billion, 1.1 percent below the revised December estimate of $982.0 billion. The January figure is 1.8 percent above the January 2014 estimate of $954.6 billion.
Both private and public spending decreased in January:
Spending on private construction was at a seasonally adjusted annual rate of $697.6 billion, 0.5 percent below the revised December estimate of $700.9 billion. ...

In January, the estimated seasonally adjusted annual rate of public construction spending was $273.8 billion, 2.6 percent below the revised December estimate of $281.1 billion.
emphasis added
Note: Non-residential for offices and hotels is generally 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 14% 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 dipped a little last year, but is increasing again.

Non-residential spending is 17% below the peak in January 2008.

Public construction spending is now 16% below the peak in March 2009 and about 5% 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 3%. Non-residential spending is up 5% year-over-year. Public spending is up 5% 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 well below the consensus forecast of a 0.3% increase, with weakness in Public and non-residential spending.