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Construction Spending Downward Spiral Continues In February 2011

If you are looking for the primary result of terrible economic dynamics, it becomes obvious when looking at construction spending.  For February 2011, the downward spiral continues.

Next month, the seasonality of the data should show an improvement so that I do not have to reset the axis of the above graph.  People and business do not spend money when they do not derive a benefit.  Currently home prices are falling and consumer demand is flat – no reason to spend money.

Government construction (roughly 40% of construction) spending is what has remained stable throughout this sector’s collapse.  This does not look to be the case going forward.  Using the government’s seasonally adjusted data, construction is down this month.  The headlines:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2011 was estimated at a seasonally adjusted annual rate of $760.6 billion, 1.4 percent (±1.4%)* below the revised January estimate of $771.0 billion. The February figure is 6.8 percent (±1.6%) below the February 2010 estimate of $815.8 billion.

During the first 2 months of this year, construction spending amounted to $103.7 billion, 8.2 percent (±1.6%) below the $112.9 billion for the same period in 2010.

PRIVATE CONSTRUCTION
Spending on private construction was at a seasonally adjusted annual rate of $468.0 billion, 1.4 percent (±1.3%) below the revised January estimate of $474.6 billion. Residential construction was at a seasonally adjusted annual rate of $228.5 billion in February, 3.7 percent (±1.3%) below the revised January estimate of $237.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $239.6 billion in February, 0.9 percent (±1.3%)* above the revised January estimate of $237.4 billion.

PUBLIC CONSTRUCTION
In February, the estimated seasonally adjusted annual rate of public construction spending was $292.5 billion, 1.3 percent (±1.9%)* below the revised January estimate of $296.4 billion. Educational construction was at a seasonally adjusted annual rate of $67.1 billion, 3.7 percent (±3.5%) below the revised January estimate of $69.6 billion. Highway construction was at a seasonally adjusted annual rate of $83.8 billion, 0.4 percent (±6.4%)* above the revised January estimate of $83.4 billion.

Construction, unlike other many sectors – has a fairly large multiplier for jobs creation through the economy, about 1.9 according to a recent GEI Analysis article.     The continuing collapse of construction spending is putting strong headwinds on jobs.

Econintersect’s review of residential construction permits and completions does offer some hope that this industry is bottoming (analysis here).

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