Construction Spending Bottoming Process Continued in December 2012

Construction spending is indicating its long decline is over with December 2011 spending the third month in a row of improvement year-over-year.

US Census Analysis:

  • Up 1.5% month-over-month and Up 4.3% year-over-year
  • Market expected Up 0.4% to 0.5% month-over-month

Econintersect analysis:

  • Up 3.2% month-over-month and Up 3.7% year-over-year
  • Inflation adjusted construction spending Up 4.1% month-over-month – and down 1.7% year-over-year.

Construction spending (unadjusted data) was declining year-over-year for 47 straight months until October 2011. That was almost four years of headwinds for GDP. December 2011 is the third month of year-over-year construction spending expansion.

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during December 2011 was estimated at a seasonally adjusted annual rate of $816.4 billion, 1.5 percent (±1.4%) above the revised November estimate of $804.0 billion. The December figure is 4.3 percent (±1.9%) above the December 2010 estimate of $782.9 billion.

The value of construction in 2011 was $787.4 billion, 2.0 percent (±1.1%) below the $803.6 billion spent in 2010.

PRIVATE CONSTRUCTION

Spending on private construction was at a seasonally adjusted annual rate of $529.7 billion, 2.1 percent (±1.1%) above the revised November estimate of $518.8 billion. Residential construction was at a seasonally adjusted annual rate of $241.2 billion in December, 0.8 percent (±1.3%)* above the revised November estimate of $239.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $288.5 billion in December, 3.3 percent (±1.1%) above the revised November estimate of $279.4 billion.

The value of private construction in 2011 was $504.1 billion, 0.7 percent (±1.4%)* above the $500.6 billion spent in 2010. Residential construction in 2011 was $236.2 billion, 1.1 percent (±2.1%)* below the 2010 figure of $238.8 billion and nonresidential construction was $268.0 billion, 2.4 percent (±1.4%) above the $261.8 billion in 2010.

PUBLIC CONSTRUCTION

In December, the estimated seasonally adjusted annual rate of public construction spending was $286.6 billion, 0.5 percent (±2.1%)* above the revised November estimate of $285.3 billion. Educational construction was at a seasonally adjusted annual rate of $70.6 billion, 0.6 percent (±3.4%)* below the revised November estimate of $71.1 billion. Highway construction was at a seasonally adjusted annual rate of $84.5 billion, 1.8 percent (±5.0%)* above the revised November estimate of $82.9 billion.

The value of public construction in 2011 was $283.3 billion, 6.5 percent (±1.4%) below the $303.0 billion spent in 2010.  Educational construction in 2011 was $70.9 billion, 5.3 percent (±3.2%) below the 2010 figure of $74.9 billion and highway construction was $78.9 billion, 4.5 percent (±3.2%) below the $82.5 billion in 2010.

In December 2011, public sector construction is down 3.6% year-over-year. Private construction is up 3.7% year-over-year (all numbers are unadjusted). For 2011, public sector construction down 6.5%, and private construction up 0.7% (all numbers are unadjusted).

Inflation adjusted construction spending (which compares apples to apples between time periods) remains down 1.7% year-over-year.

It is noteworthy, as pointed out by Business Insider, construction employment actually grew year-over-year in December for the first time in more than four years.

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 headline data is seasonally adjusted. Econintersect uses the raw unadjusted data.

Econintersect determines the month-over-month change by subtracting the current month’s year-over-year change from the previous month’s year-over-year change. This is the best of the bad options available to determine month-over-month trends – as the preferred methodology would be to use multi-year data (but the New Normal effects and the Great Recession distort historical data).

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 (updated through November 2011).

The main driver of construction spending is the private sector. Here is the historical breakdown. The graph below uses US Census seasonally adjusted data (updated through November 2011).

Related Articles:

All Construction Spending Articles

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