Wednesday, April 01, 2015

Construction Spending decreased 0.1% in February

by Bill McBride on 4/01/2015 12:35:00 PM

Earlier today, the Census Bureau reported that overall construction spending decreased in February:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2015 was estimated at a seasonally adjusted annual rate of $967.2 billion, 0.1 percent below the revised January estimate of $967.9 billion. The February figure is 2.1 percent above the February 2014 estimate of $947.1 billion.
Private spending increased and public spending decreased:
Spending on private construction was at a seasonally adjusted annual rate of $698.2 billion, 0.2 percent above the revised January estimate of $696.9 billion. ...

In February, the estimated seasonally adjusted annual rate of public construction spending was $268.9 billion, 0.8 percent below the revised January estimate of $271.0 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 10% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 17% year-over-year.

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 16% below the peak in January 2008.

Public construction spending is now 17% below the peak in March 2009 and about 3% 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 2%. Non-residential spending is up 6% year-over-year. Public spending is up 3% 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 0.2% increase, and spending for January was revised down (December was revised up).