Construction Spending Advances in November

01/27/2012 by Bernard M. Markstein

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The U.S. Census Bureau reported that total construction spending increased 1.2% in November following a modest 0.2% decline in October. November total construction spending was $807.1 billion at a seasonally adjusted annual rate. Year-to-date construction spending was down 2.5% from the same period a year earlier.

Nonresidential building was essentially flat, up 0.1% to $278.7 billion, while heavy engineering (non-building) construction spending rose 1.8% to $277.0 billion in November, its fourth consecutive monthly increase. Total residential construction spending, which includes improvements, was up 1.8% after rising 2.1% in October. New residential construction spending, which excludes improvements, rose 1.2% following a 0.2% gain in October.

Total public construction spending rebounded 1.7% in November after falling 1.8% in October. The increase was due to nonresidential construction, which rose 1.8%, while residential construction spending fell 3.1%. However, the future for public spending still appears to be down as local governments continue to tighten their belts in order to balance their budgets and as politicians seek to reduce the federal government’s deficit. Some hope comes from the states, most of which are seeing their revenues improve faster than expected. Meanwhile, total private construction spending rose 1.0% in November, the seventh monthly increase in the last eight months.

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

  Current Monthly 3-Month Moving Average Year-to-Date (NSA)
  Sep-11 Oct-11 Nov-11 Sep-11 Oct-11 Nov-11 Jan-10 to
Nov-10
Jan-11 to
Nov-11
New Single-family 106.8 107.4 109.1 106.4 107.0 107.8 104.7 98.6
  Month-over-Month % Change 0.2% 0.5% 1.5% 0.5% 0.5% 0.8%    
  Year-over-year % Change (NSA) -0.3% 1.1% 2.8%       7.9% -5.8%
New Multifamily (1) 22.7 22.4 22.3 22.6 22.8 22.5 21.9 20.3
  -2.4% -1.5% -0.1% 1.8% 0.8% -1.4%    
  -6.7% -6.3% -9.3%       -35.1% -7.4%
New Residential (2) 129.5 129.8 131.4 129.0 129.7 130.2 126.6 118.9
  -0.2% 0.2% 1.2% 0.7% 0.6% 0.4%    
  -1.5% -0.2% 0.6%       -3.2% -6.1%
Residential Improvements (3) 112.1 117.1 120.0 108.7 112.6 116.4 104.9 108.0
  3.4% 4.4% 2.5% -3.9% 3.6% 3.4%    
  4.0% 2.8% 6.1%       0.1% 3.0%
Total Residential (4) (5) 241.7 246.9 251.4 237.6 242.3 246.7 231.5 226.9
  1.4% 2.1% 1.8% -1.5% 2.0% 1.8%    
  0.9% 1.3% 3.0%       -1.7% -2.0%
Nonresidential Building 287.3 278.5 278.7 284.2 283.8 281.5 267.9 254.4
  0.6% -3.1% 0.1% 0.4% -0.1% -0.8%    
  -0.6% 0.8% 1.6%       -23.6% -5.0%
Heavy Engineering (Non-Building) 270.0 272.0 277.0 265.7 269.5 273.0 244.2 243.5
  1.3% 0.8% 1.8% 0.9% 1.4% 1.3%    
  -1.1% -1.6% -1.9%       -3.4% -0.3%
Total (5) 799.0 797.4 807.1 787.5 795.6 801.2 743.6 724.8
  1.1% -0.2% 1.2% 0.0% 1.0% 0.7%    
  -0.3% 0.1% 0.7%       -11.4% -2.5%

Monthly levels are seasonally adjusted at annual rates (SAAR figures).
(1) New Multifamily = New Private Multifamily + New Public Multifamily - Public Improvements (estimated by Reed Economics)
(2) New Residential = New Single-family + New Multifamily
(3) Residential Improvements include remodeling, renovation and replacement work.
Number also includes RCD estimate of improvements to public housing.
(4) Total Residential = New Single-family + New Multifamily + Residential Improvements.
(5) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce.

Positive economic reports continue to accumulate, indicating that the United States will avoid falling into a new recession over the next several months. The Federal Reserve’s statement that it expects to keep interest rates low through 2014 is a positive for the economy and construction. Developments in Europe and a prolonged, large increase in oil prices remain as the major risks to the U.S. economy, and therefore to the construction forecast. The current high price of oil is worrisome, but not at a level that is likely to tip the U.S. into recession. Further, oil prices are likely to fall back a bit from their current level over the next month or so. Assuming no recession, the Reed Construction Data forecast is for total construction spending to increase 5.6% in 2012 and 6.3% in 2013.

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

  Actual Forecast
  2008 2009 2010 2011 2012 2013
New Single-family 185.8 105.3 112.6 106.9 113.4 121.5
   Year-over-year % Change -39.1% -43.3% 6.9% -5.1% 6.1% 7.1%
New Multifamily (1) 51.2 35.9 23.7 22.1 23.7 26.6
-8.1% -30.0% -34.0% -6.7% 7.2% 12.3%
New Residential (2) 237.0 141.2 136.2 129.0 137.1 148.1
  -34.3% -40.4% -3.5% -5.3% 6.3% 8.0%
Residential Improvements (3) 120.7 112.7 112.5 116.4 122.7 128.2
-13.5% -6.6% -0.2% 3.5% 5.4% 4.5%
Total Residential (4) (5) 357.7 253.9 248.7 245.4 259.8 276.3
-28.5% -29.0% -2.1% -1.3% 5.9% 6.3%
Nonresidential Building 437.7 375.7 288.9 275.8 288.7 312.2
8.4% -14.2% -23.1% -4.5% 4.7% 8.1%
Heavy Engineering (Non-Builidng) 272.1 273.5 266.0 264.4 281.3 293.5
  9.7% 0.5% -2.8% -0.6% 6.4% 4.4%
Total (5) 1,067.6 903.2 803.6 785.6 829.8 882.0
-7.4% -15.4% -11.0% -2.2% 5.6% 6.3%

(1) New Multifamily = New Private Multifamily + New Public Multifamily - Public Improvements
(estimated by Reed Economics)
(2) New Residential = New Single-family + New Multifamily
(3) Residential Improvements include remodeling, renovation and replacement work.
Number also includes RCD estimate of improvements to public housing.
(4) Total Residential = New Single-family + New Multifamily + Residential Improvements.
(5) Total may not equal the sum of its components due to rounding.
Source: Census Bureau, U.S. Department of Commerce. Forecast: Reed Construction Data.

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