Tuesday, September 01, 2015

Construction Spending increased 0.7% in July

by Bill McBride on 9/01/2015 11:03:00 AM

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

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2015 was estimated at a seasonally adjusted annual rate of $1,083.4 billion, 0.7 percent above the revised June estimate of $1,075.9 billion. The July figure is 13.7 percent above the July 2014 estimate of $952.5 billion
Private spending increased and public spending decreased:
Spending on private construction was at a seasonally adjusted annual rate of $787.8 billion, 1.3 percent above the revised June estimate of $777.4 billion. ...

In July, the estimated seasonally adjusted annual rate of public construction spending was $295.6 billion, 1.0 percent below the revised June estimate of $298.5 billion.
emphasis added
Note: Non-residential for offices and hotels is generally increasing, but spending for oil and gas has been declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because oil prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for private lodging is up 41% year-over-year, whereas spending for power (includes oil and gas) construction peaked in mid-2014 and is down 13% 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 has been increasing recently, and is 44% below the bubble peak.

Non-residential spending is only 2% below the peak in January 2008 (nominal dollars).

Public construction spending is now 9% below the peak in March 2009 and about 12% 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 up 16%. Non-residential spending is up 18% year-over-year. Public spending is up 6% year-over-year.

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

This was close to the consensus forecast of a 0.8% increase, and spending for May and June was revised up.  Overall, another solid construction report.