Construction Spending Shows Degradation in June 2011

US Census says construction spending is up 0.2% month-over-month seasonally adjusted in June 2011.  0.2% is hardly a high growth number but Econintersect’s analysis of the data shows there more likely was a 0.4% decline.

PRIVATE CONSTRUCTION – Spending on private construction was at a seasonally adjusted annual rate of $493.4 billion, 0.8 percent (±1.3%)* above the revised May estimate of $489.6 billion. Residential construction was at a seasonally adjusted annual rate of $235.8 billion in June, 0.3 percent (±1.3%)* below the revised May estimate of $236.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $257.7 billion in June, 1.8 percent (±1.3%) above the revised May estimate of $253.1 billion.

PUBLIC CONSTRUCTION – In June, the estimated seasonally adjusted annual rate of public construction spending was $278.9 billion, 0.7 percent (±2.6%)* below the revised May estimate of $280.9 billion. Educational construction was at a seasonally adjusted annual rate of $66.4 billion, 4.1 percent (±4.0%) below the revised May estimate of $69.3 billion. Highway construction was at a seasonally adjusted annual rate of $74.6 billion, 1.6 percent (±7.7%)* below the revised May estimate of $75.8 billion.

Until recently, very little of the construction spending contraction was from contraction in public sector.  However, in June 2011, private sector contraction was only 1.8% while public sector is down 9.7%. Having public sector construction contracting at a higher rate than the private sector is a new phenomenon in the data – and likely due to contracting public sector budgets caused by the shrinking stimulus effect. This does not bode well for the investment component of GDP.

The generally “less bad” improvement in construction spending has now stalled.  In addition, the contracting public sector construction bodes negatively for construction employment.

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