Non-Residential Structure Investment in Q1

Earlier this week, the Census Bureau reported that private non-residential construction spending had declined for the third straight month.

Click on graph for larger image.

The graph shows private residential and nonresidential construction spending since 1993.

Over the last couple of years, as residential spending has declined, nonresidential has been very strong. However, it now appears that non-residential construction spending is declining.

Looking ahead to the Q1 GDP report from the BEA, this implies that real non-residential investment (non-RI) will probably decline in Q1 2008. This follows a number of quarters of positive contributions to GDP from non-RI in structures. Over the last three quarters, non-RI in structures added 0.78% to GDP in Q2, 0.52% in Q3, and 0.41% in Q4 2007.

This graph compares the nominal Census Bureau non-residential construction spending with the BEA non-residential investment in structures. Note: Construction spending numbers are not available for March yet.

Although the data sets are different, there is a high correlation between the two series. These are nominal numbers, and in real terms this suggests strongly that non-residential investment declined in Q1.