by Calculated Risk on 10/01/2008 10:00:00 AM

It now appears that private non-residential construction has peaked, and I expect non-residential investment will decline sharply over the next year.

From the Census Bureau: August 2008 Construction at 1,072.1 Billion Annual Rate

Spending on private construction was at a seasonally adjusted annual rate of $759.6 billion, 0.3 percent below the revised July estimate of $761.8 billion.

Residential construction was at a seasonally adjusted annual rate of $343.6 billion in August, 0.3 percent above the revised July estimate of $342.5 billion.

Nonresidential construction was at a seasonally adjusted annual rate of $416.0 billion in August, 0.8 percent below the revised July estimate of $419.3 billion.

Click on graph for larger image in new window.

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

Nonresidential spending has been strong as builders complete projects, but there is substantial evidence of a looming slowdown - less lending for new projects, less work for architects - and it appears the expected slowdown in non-residential spending has arrived.


The second graph shows the year-over-year change for private residential and non-residential construction spending.

The YoY change in non-residential spending is starting to slow down and will probably turn negative later this year or early in 2009.

Not only has Personal Consumption Expenditures (PCE) turned negative in Q3, but it now looks like non-residential investment in structures is starting to decline. This was one of few bright spots in the economy (along with exports), and a decline in non-residential investment is more evidence of a recession.