Total construction spending, including inflation, has been steady for eight months within a very narrow range. July spending dropped 0.6% but the initial June total was revised higher, the third consecutive upward revision of the prior month. Adjusting for inflation, construction volume continues its twenty-eight month decline. The decline has now reached 10.7% and about double that after subtracting the increase in project costs.

A resumed increase in nominal construction spending is expected by yearend when the housing market decline reverses. Real growth will begin a few months later. Until early 2009, contractors will continue to lay off workers on top of the 551,000 already laid off. Construction materials production will remain stagnant and could decline another percentage point until then. The smaller negative impact on materials than employment is due to a rapid rise in materials exports in response to a cheaper $US and stronger economic growth outside the US. Also, the depressed construction equipment market will weaken a little more into 2009. Again, higher exports are offsetting weakening domestic sales.

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

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