According to US Census, construction spending increased in October 2010 by 0.7% – Econintersect disagrees believing construction spending fell month-over-month (MoM). First the headlines:
The U.S. Census Bureau of the Department of Commerce announced today that construction spending during October 2010 was estimated at a seasonally adjusted annual rate of $802.3 billion, 0.7 percent (±1.4%)* above the revised September estimate of $797.1 billion. The October figure is 9.3 percent (±1.8%) below the October 2009 estimate of $884.7 billion.
During the first 10 months of this year, construction spending amounted to $684.7 billion, 11.2 percent (±1.0%) below the $770.6 billion for the same period in 2009.
PRIVATE CONSTRUCTION – Spending on private construction was at a seasonally adjusted annual rate of $481.8 billion, 0.8 percent (±1.1%)* above the revised September estimate of $477.8 billion. Residential construction was at a seasonally adjusted annual rate of $229.6 billion in October, 2.5 percent (±1.3%) above the revised September estimate of $224.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $252.2 billion in October, 0.7 percent (±1.1%)* below the revised September estimate of $253.8 billion.
PUBLIC CONSTRUCTION – In October, the estimated seasonally adjusted annual rate of public construction spending was $320.5 billion, 0.4 percent (±2.1%)* above the revised September estimate of $319.2 billion. Educational construction was at a seasonally adjusted
annual rate of $75.0 billion, 1.7 percent (±3.0%)* below the revised September estimate of $76.3 billion. Highway construction was at a seasonally adjusted annual rate of $87.0 billion, 1.2 percent (±5.0%)* above the revised September estimate of $86.0 billion.
Econintersect evaluates unadjusted data. The following graphic shows the historical context of the unadjusted data.
Econintersect believes seasonal adjustment factors in general are all suspect because of the Great Recession and New Normal distortions (analysis here). There is no methodology right now that can accurately provide correct seasonal analysis as there is too much distortion in the data over the last 3 or 4 years.
October’s MoM data is simply worse than September’s.
The table above compares the data from August, September and October 2010 to previous years data for each month respectively. What is obvious is the relative strength of the September 2010 data. If September data is ignored, October seems roughly equal to August construction spending.
Going forward, Econintersect is concerned about the expiry of the stimulus, budget balancing, state government finances – and their effect on constructions spending. As an example, in 2005 the government accounted for 20% of construction spending – in 2010 it is 40%. Currently, public sector spending is higher than 2005 levels.
The public sector cutbacks will at least be $12 billion per month. Currently private sector non-residential construction is running at 2005 levels. The collapse in construction spending is all in private sector residential construction. It is unlikely there will be much growth there.
New Home Sales At Historic Lows in October 2010 by Steven Hansen
Realtors Understate Existing Home Sales Decline by Steven Hansen
Residential Building Remains in Depression by Steven Hansen
The Great Debate©: Residential Construction is Dead – Or is It? by William Wheaton and Gleb Nechayev
Demand for Housing Near an All-Time Low by John Lounsbury