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Construction Spending increased in August

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The Census Bureau reported that overall construction spending increased in August:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during August 2013 was estimated at a seasonally adjusted annual rate of 5.1 billion, 0.6 percent above the revised July estimate of 9.4 billion. The August figure is 7.1 percent above the August 2012 estimate of 4.0 billion.

Spending on private construction was at a seasonally adjusted annual rate of 0.5 billion, 0.7 percent above the revised July estimate of 6.1 billion. …

In August, the estimated seasonally adjusted annual rate of public construction spending was 4.5 billion, 0.4 percent above the revised July estimate of 3.4 billion.

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 is 50% below the peak in early 2006, and up 49% from the post-bubble low.

Non-residential spending is 27% below the peak in January 2008, and up about 34% from the recent low.

Public construction spending is now 16% below the peak in March 2009 and up about 4% from the recent 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 26%. Non-residential spending is up 4% year-over-year. Public spending is down 2% year-over-year.

To repeat a few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years – mostly related to energy and power – but the key sectors of office, retail and hotels are still at very low levels.  I expect private non-residential to start to increase.

3) Public construction spending increased in August and is now 4% above the low in April.  It is possible that the drag from public construction spending is over.  Public spending has declined to 2006 levels (not adjusted for inflation) and was a drag on the economy for 4 years. In real terms, public construction spending has declined to 2001 levels.
Calculated Risk

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