Construction spending declined 0.6% in November from an October total revised up by 1.2%. Current spending is 3.3% below a year ago and projected to decline 5-6% more by the end of the summer. Lower residential spending accounts for all of the 11% decline since early 2006 but will contribute only one-third of the further decline in the next three quarters. Most of the projected spending decline in 2009 will be in nonresidential construction. The building boom in nonresidential buildings and civil projects ended last summer with steady monthly spending since then. Ahead, both sectors will be declining through the summer. The late 2008 slowdown new construction starts reported by Reed Construction Data means that the value of projects starts will not fully replace the value of projects completed in 2009.

The monthly construction spending reports have to be interpreted in the context of deflation rather than the usual inflation in project costs. Construction material prices fell 3.2% in November on top of a large decline in October. Further, but smaller, cost declines are expected for several more months. This means that the reported 0.6% decline in November may be a small gain in construction volume. If so, it was temporary, a partial bounce-back from the panic cutbacks in activity in September and October.

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

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