Construction Spending Shows Serious Signs of Rolling Over

Construction spending rose 0.3% in September vs an Econoday consensus of 0.0%. However, the Census Bureau revised August from a 0.5% gain to a 0.1% gain. Effectively, the September boost was about 0.1% from August as initially reported. Close inspection shows serious signs of weakness.

Econoday Commented:

The non-residential sector gets a downgrade in today's construction spending report where the headline increase, at 0.3 percent in September, nevertheless beats the consensus by 3 tenths. Private non-residential spending, however, fell a steep 0.8 percent following a sharply downward revised 0.7 percent decline in August. Year-on-year, this reading is down 3.8 percent with weakness most evident in manufacturing and office building that offsets gains for commercial building.

The residential side, though unchanged in September, shows much more strength with a year-on-year rise of 9.6 percent. Spending on both new single-family and new multi-family homes actually increased in the month, up 0.2 and 0.6 percent respectively, but spending on home improvements fell back 0.6 percent.

Public spending improved in the month led by a 5.2 percent gain for educational building. Highway & street spending rose 1.1 percent in the month but the yearly decline is still steep at 7.4 percent. Both Federal and state & local spending rose in the month but are down in the low single-digits on the year.

Total Construction Spending

Commercial Construction

Residential construction peaked in February of 2006 at $698,903 million. Today residential construction is at $521,445 million, a decline of 25.4% despite 11.5 years of recovery.

Non-residential construction peaked at $714,495 million in October of 2008. It exceeded that total from June 2016 thru May 2017.

Commercial construction has still not topped the $98,845 million high in February of 2008. Commercial construction spending has declined every month since the the May 2017 rebound peak.

Commercial construction includes office space and retail stores, both drivers of job growth. Every Walmart that goes up creates construction job, stocking jobs, and permanent employees to man the stores. Weekly shipments crate trucking jobs.

Residential and non-residential construction show signs of rolling over, with obvious implications. If so, don't count on hurricanes to save the day.

Mike "Mish" Shedlock

Comments (3)
No. 1-3

No at all. In MI they building everywhere and there are labor shortages and skyrocketing construction costs.


makes you wonder where they are putting all those additional capital goods which boosted Q3 GDP.


Mish -- less construction spending, measured in $$$ doesn't really tell us anything.

Is there less activity overall (the amount of construction I see, and the labor shortages in many areas of the country suggest not)? Or are people building fewer McMansions, and more practical houses that cost less?

Between municipal corruption and skyrocketing property taxes to pay for pensions "we the people" don't get, and the tightening of lending standards from banks that already used their bailout card, it would seem like home buyers are making practical adjustments -- adapting to municipal corruption and more realistic credit availability.

The USA needs another shopping mall like we need another pointless unending war. There is more telecommuting going on; more salespeople on the road are sharing common office space on the few days they are at the home office -- both trends are reducing the need for office buildings.

In short, a deeply indebted nation is making very practical adjustments to yester-year's debt binge... As baby boomers attempt to retire and find out how worthless social security promises are, and as younger generations find their increased paychecks being seized for debt service and obamacare.... I would expect and plan for more practical spending patterns.