Monday, January 05, 2009

Construction Spending Declines in November

by Calculated Risk on 1/05/2009 10:00:00 AM

From the Census Bureau: November 2008 Construction at $1,078.4 Billion Annual Rate

Spending on private construction was at a seasonally adjusted annual rate of $756.4 billion, 1.5 percent (±1.1%) below the revised October estimate of $767.7 billion. Residential construction was at a seasonally adjusted annual rate of $328.3 billion in November, 4.2 percent (±1.3%) below the revised October estimate of $342.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $428.2 billion in November, 0.7 percent (±1.1%)* above the revised October estimate of $425.1 billion.
Construction Spending Click on graph for larger image in new window.

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

Nonresidential spending is still holding up as builders complete projects, but there is substantial evidence of a slowdown - less lending for new projects, less work for architects - and it appears that non-residential spending has peaked. On the graph nonresidential spending has been relatively flat for the last few months, but I expect some serious cliff diving over the next 18 months.

Construction Spending
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 early in 2009. Residential construction spending is still declining, but the rate of decline has slowed.

Also - it now looks like investment in non-residential structures might be neutral for GDP in Q4.