Construction Spending Expanded in October 2011

Construction spending improved in the month of October 2011 – and depending on your method of analysis – Construction spending just showed its first year-over-year gain in 48 months.

US Census Analysis:

  • Up 0.8% month-over-month and Down 0.4% year-over-year
  • Market expected 0.2% to 0.3%

Econintersect’s analysis:

  • Up 1.3% month-over-month and Up 0.3% year-over-year
  • Inflation adjusted construction spending Up 2.8% month-over-month – and down 6.4% year-over-year.

Construction spending (unadjusted data) was declining year-over-year for 47 straight months. That is almost four years of headwinds for GDP. Until it was revised, in August 2011 construction spending improved year-over-year also.  Backward revisions may do away with this gain also next month.

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during October 2011 was estimated at a seasonally adjusted annual rate of $798.5 billion, 0.8 percent (±1.6%)* above the revised September estimate of $792.1 billion. The October figure is 0.4 percent (±1.9%)* below the October 2010 estimate of $802.0 billion.

During the first 10 months of this year, construction spending amounted to $655.5 billion, 2.9 percent (±1.1%) below the $675.4 billion for the same period in 2010.

PRIVATE CONSTRUCTION – Spending on private construction was at a seasonally adjusted annual rate of $518.6 billion, 2.3 percent (±1.1%) above the revised September estimate of $507.1 billion. Residential construction was at a seasonally adjusted annual rate of $239.0 billion in October, 3.4 percent (±1.3%) above the revised September estimate of $231.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $279.6 billion in October, 1.3 percent (±1.1%) above the revised September estimate of $275.9 billion.

PUBLIC CONSTRUCTION – In October, the estimated seasonally adjusted annual rate of public construction spending was $279.9 billion, 1.8 percent (±2.4%)* below the revised September estimate of $285.0 billion. Educational construction was at a seasonally adjusted annual rate of $72.2 billion, 1.8 percent (±4.3%)* below the revised September estimate of $73.6 billion. Highway construction was at a seasonally adjusted annual rate of $80.1 billion, 0.4 percent (±5.6%)* below the revised September estimate of $80.5 billion.

Public sector construction is down 9.1% year-over-year. Private construction is up 6.2% year-over-year.

Inflation adjusted construction spending (which compares apples to apples between time periods) remains down 6.4% year-over-year.

Caveats on the Use of Construction Spending Data

Although the data in this series is revised for several months after issuing, the revision is generally minor.  This series is produced by sampling – and the methodology varies by sector being sampled.

The data set for construction spending is not inflation adjusted.  Econintersect adjusts using the BLS Producers Price Index – subindex New Construction (PCUBNEW–BNEW).

Construction (which historically is an major economic driver) is a literal shadow of its former self. Its contribution to GDP is down $400 billion from its peak level in 2006.  The graph below uses US Census seasonally adjusted data.

The main driver of construction spending is the private sector.  Here is the historical breakdown.  The graph below uses US Census seasonally adjusted data.

Related Articles:

All Construction Spending Articles

http://www.census.gov/const/www/c30index.html
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