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Construction Spending Down 1.2% in December

0 205 Market Intelligence

Total construction spending dropped 1.2% in December but the level of spending in November was revised up. The upward revision for private construction spending more than offset the downward revision for public construction spending. This reverses the pattern in the last few months when private developer financed spending was revised down on late information about suspensions of previously started projects, says Reed Construction Data chief economist Jim Haughey.

Total construction spending dropped 1.2% in December but the level of spending in November was revised up. The upward revision for private construction spending more than offset the downward revision for public construction spending. This reverses the pattern in the last few months when private developer financed spending was revised down on late information about suspensions of previously started projects.

If this reversal in trend holds it signals the beginning of the final phase of the construction recession: The plunge in developer financed construction ends and the full impact of the recession finally reaches public construction. Note that office ands retail construction spending increased slightly in December while spending for highway and water/sewer projects fell significantly. Total private construction spending declined in December but the drop was almost entirely in the unreliable measure of residential remodeling spending.

The Reed Construction Data forecast has been revised slightly down to now project a 12.2% drop in 2009, a 4.6% drop next year and a 6.2% recovery in 2011. Monthly jobsite construction spending is expected to continue falling into the winter before a turnaround in May or June. The cumulative decline since spring 2007 has now passed 22% with a further 1-2% fall expected.

U.S. Total Construction Spending
(billions of U.S. current dollars – annual figures)

  Actual Forecast
  2005 2006 2007 2008 2009 2010 2011
New Residential (% change 485.0 476.9 362.3 237.5 143.3 155.0 187.675
is year vs previous year) 15.1% -1.7% -24.0% -34.4% -39.7% 8.2% 21.1%
Residential Improvements* 131.1 145.9 140.1 121.0 118.3 122.0 124.725
  13.4% 11.2% -3.9% -13.6% -2.3% 0.0% 2.2%
Non-residential Building 303.2 342.0 407.7 445.0 404.9 347.5 361.32
  7.0% 12.8% 19.2% 9.1% -9.0% -14.2% 4.0%
Non-building 181.4 205.0 240.9 268.2 274.6 273.6 279.7625
   (heavy engineering) 5.4% 13.0% 17.5% 11.3% 2.4% -0.4% 2.3%
Total 1100.8 1169.8 1151.1 1071.8 941.1 898.1 953.4825
  10.9% 6.3% -1.6% -6.9% -12.2% -4.6% 6.2%

*Residential Improvements include remodeling, renovation and replacement work.
Actuals: U.S. Census Bureau, Department of Commerce.
Forecasts and table: Reed Construction Data.

by Jim Haughey

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