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Construction Spending decreased 0.4% in September

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Earlier the Census Bureau reported that overall construction spending decreased in September:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during September 2014 was estimated at a seasonally adjusted annual rate of 0.9 billion, 0.4 percent below the revised August estimate of 5.2 billion.. The September figure is 2.9 percent (±2.1%) above the September 2013 estimate of 4.2 billion.

Both private and public spending decreased in September:

Spending on private construction was at a seasonally adjusted annual rate of 0.0 billion, 0.1 percent below the revised August estimate of 0.8 billion. Residential construction was at a seasonally adjusted annual rate of 9.1 billion in September, 0.4 percent above the revised August estimate of 7.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of 1.0 billion in September, 0.6 percent below the revised August estimate of 3.0 billion. …

In September, the estimated seasonally adjusted annual rate of public construction spending was 0.9 billion, 1.3 percent below the revised August estimate of 4.4 billion.
emphasis added

Note: Non-residential for offices and hotels is increasing, but spending for oil and gas is declining. Early in the recovery, there was a surge in non-residential spending for oil and gas (because prices increased), but now, with falling prices, oil and gas is a drag on overall construction spending.

As an example, construction spending for lodging is up 15% year-over-year, whereas spending for power (includes oil and gas) construction is down 11% since peaking in May.

Private Construction Spending Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending has declined recently and is 48% below the peak in early 2006 – but up 53% from the post-bubble low.

Non-residential spending is 20% below the peak in January 2008, and up about 47% from the recent low.

Public construction spending is now 17% below the peak in March 2009 and about 4% above the post-recession low.

Private Construction SpendingThe second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 1%. Non-residential spending is up 6% year-over-year. Public spending is up 2% year-over-year.

Looking forward, all categories of construction spending should increase in 2015. Residential spending is still very low, non-residential is starting to pickup, and public spending has probably hit bottom after several years of austerity.

This was a weak report – well below the consensus forecast of a 0.6% increase – and there were also downward revisions to spending in July and August.
Calculated Risk

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