Total construction spending was unchanged in October but fell 0.9% ignoring a large questionable rise in residential remodeling spending. Septembers’ initial gain of 0.8% was revised to a decline of 1.6%. This is a surprisingly disappointing report which strongly suggests that the bottom of the construction recession is still 3-5 months ahead and even longer for developer financed commercial construction, says Reed Construction Data chief economist Jim Haughey.
Total construction spending was unchanged in October but fell 0.9% ignoring a large questionable rise in residential remodeling spending. Septembers’ initial gain of 0.8% was revised to a decline of 1.6%. This is a surprisingly disappointing report which strongly suggests that the bottom of the construction recession is still 3-5 months ahead and even longer for developer financed commercial construction.
The Reed Construction Data forecast has been revised down to now project a 12.3% drop in 2009, a 3.1% drop next year and a 6.6% recovery in 2011. Monthly jobsite construction spending is expected to continue falling through the winter before a turnaround in April or May. The cumulative decline since spring 2007 has now reached nearly 22%. A further 1-2% fall is expected through the winter.
The monthly declines are now much smaller because the single family housing and highway markets, both boosted by the stimulus plan, are now expanding. Several other markets are stable, neither rising or falling. This includes education, healthcare, public safety, amusement/recreation, transportation facilities and water/sewer. Each of these is also getting some stimulus funding.
Several large downward revisions have occurred in recent months even after ignoring the huge month to month swings in the hard to measure residential remodeling market. The cuts results come from suspensions of already started developer financed, power and manufacturing projects. The initial spending estimates assumed that these projects were continuing but later data showed that they had been stopped. Them nominal reason for the suspension is usually lack of financing. But the underlying reason is the recession. Rental projects no longer look likely to be profitable when completed and facility projects are suspended when the added capacity is no longer needed when the project is scheduled to be competed.
U.S. Total Construction Spending
(billions of U.S. current dollars – annual figures)
|New Residential (% change
| is year vs previous year)
| (heavy engineering)
*Residential Improvements include remodeling, renovation and replacement work.
Actuals: U.S. Census Bureau, Department of Commerce.
Forecasts and table: Reed Construction Data.
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