Construction Spending Is Indicating 3Q2010 GDP Facing Larger Headwinds

Construction spending in July 2010 contracted 0.8% MoM using seasonally adjusted data. The data release stated in part:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during July 2010 was estimated at a seasonally adjusted annual rate of $805.2 billion, 1.0 percent (±1.4%)* below the revised June estimate of $813.1 billion. The July figure is 10.7 percent (±1.8%) below the July 2009 estimate of $901.2 billion. During the first 7 months of this year, construction spending amounted to $460.3 billion, 11.8 percent (±1.1%) below the $522.0 billion for the same period in 2009.

Spending on private construction was at a seasonally adjusted annual rate of $506.4 billion, 0.8 percent (±1.3%)* below the revised June estimate of $510.7 billion. Residential construction was at a seasonally adjusted annual rate of $240.3 billion in July, 2.6 percent (±1.3%) below the revised June estimate of $246.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $266.1 billion in July, 0.8 percent (±1.3%)* above the revised June estimate of $264.0 billion.

In July, the estimated seasonally adjusted annual rate of public construction spending was $298.8 billion, 1.2 percent (±2.1%)* below the revised June estimate of $302.4 billion. Educational construction was at a seasonally adjusted annual rate of $73.0 billion, 0.1 percent (±3.8%)* below the revised June estimate of $73.1 billion. Highway construction was at a seasonally adjusted annual rate of $76.8 billion, 2.9 percent (±5.6%)* below the revised June estimate of $79.1 billion.

Because of the data posting methodology used by the US Census, there is not a good way to evaluate this data – and I will have to assume it is correct.

GDP’s 2Q2010 weakness was in the private investment area. Please view Economy and GDP for this analysis. This new data for the first month of 3Q2010 is indicating higher GDP 3Q headwinds.

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