Construction Spending Flat in July 2011

US Census says construction spending is down 1.3% month-over-month seasonally adjusted in July 2011.  Econintersect’s analysis using the unadjusted data reports that construction spending is flat month-over-month.

Any weakness in the numbers is caused by public sector construction spending which is down month-over-month being offset by private sector spending rising.  These numbers are NOT inflation adjusted, and in reality construction activity by estimated units of work is down between 3% and 7% depending on which inflation index you want to use.

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2011 was estimated at a seasonally adjusted annual rate of $789.5 billion, 1.3 percent (±1.9%)* below the revised June estimate of $799.8 billion. The July figure is 0.1 percent (±1.9%)* above the July 2010 estimate of $789.0 billion.

During the first 7 months of this year, construction spending amounted to $435.5 billion, 3.5 percent (±1.3%) below the $451.2 billion for the same period in 2010.

PRIVATE CONSTRUCTION – Spending on private construction was at a seasonally adjusted annual rate of $514.5 billion, 0.9 percent (±1.1%)* below the revised June estimate of $519.0 billion. Residential construction was at a seasonally adjusted annual rate of $248.1 billion in July, 1.4 percent (±1.3%) below the revised June estimate of $251.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $266.4 billion in July, 0.4 percent (±1.1%)* below the revised June estimate of $267.3 billion.

PUBLIC CONSTRUCTION – In July, the estimated seasonally adjusted annual rate of public construction spending was $275.0 billion, 2.1 percent (±2.7%)* below the revised June estimate of $280.8 billion. Educational construction was at a seasonally adjusted annual rate of $67.2 billion, 4.3 percent (±4.3%)* below the revised June estimate of $70.2 billion. Highway construction was at a seasonally adjusted annual rate of $74.9 billion, 0.5 percent (±8.0%)* above the revised June estimate of $74.5 billion.

Until recently, very little of the construction spending contraction was from contraction in public sector. However, in July 2011, private sector contraction was only 1.7% while public sector is down 6.5% (all YoY).  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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All Construction Spending Articles

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