Construction Spending Is Up In November 2010 and Still Terrible

According to US Census, construction spending increased in November 2010 by 0.4% month-over-month (MoM) – and is still down approximately 6% year-over-year (YoY).    First the headlines:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during November 2010 was estimated at a seasonally adjusted annual rate of $810.2 billion, 0.4 percent (±1.6%)* above the revised October estimate of $806.7 billion. The November figure is 6.0 percent (±1.9%) below the November 2009 estimate of $861.5 billion.  During the first 11 months of this year, construction spending amounted to $753.9 billion, 10.6 percent (±1.0%) below the $843.1 billion for the same period in 2009.

PRIVATE CONSTRUCTION – Spending on private construction was at a seasonally adjusted annual rate of $491.8 billion, 0.3 percent (±1.1%)* above the revised October estimate of $490.5 billion. Residential construction was at a seasonally adjusted annual rate of $235.7 billion in November, 0.7 percent (±1.3%)* above the revised October estimate of $234.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $256.1 billion in November, 0.1 percent (±1.1%)* below the revised October estimate of $256.3 billion.

PUBLIC CONSTRUCTION – In November, the estimated seasonally adjusted annual rate of public construction spending was $318.5 billion, 0.7 percent (±2.2%)* above the revised October estimate of $316.2 billion. Educational construction was at a seasonally adjusted annual rate of $73.4 billion, 1.0 percent (±3.2%)* above the revised October estimate of $72.7 billion. Highway construction was at a seasonally adjusted annual rate of $86.8 billion, 1.0 percent (±5.4%)* below the revised October estimate of $87.7 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.

Without the quantitative analysis, the simple reason that there is any claim construction spending has improved is that last month construction spending was off 9% YoY, and this month it is approximately 6% YoY.

The interesting new trend-breaker is that the decline was almost equal in public and private sector construction.  Prior to this month, all the weakness was in the private sector.  Last month Econintersect warned:

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.

Related Posts

New Residential Construction Is Almost Comatose In November 2010 by Steven Hansen

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