by Calculated Risk on 3/01/2011 12:45:00 PM

Catching up ... the Census Bureau reported this morning that overall construction spending decreased in January compared to December (seasonally adjusted).

[C]onstruction spending during January 2011 was estimated at a seasonally adjusted annual rate of $791.8 billion, 0.7 percent (±1.4%)* below the revised December estimate of $797.6 billion.

Private construction spending also decreased in January:

Spending on private construction was at a seasonally adjusted annual rate of $490.0 billion, 1.2 percent (±1.1%) below the revised December estimate of $495.9 billion. Residential construction was at a seasonally adjusted annual rate of $245.6 billion in January, 5.3 percent (±1.3%) above the revised December estimate of $233.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $244.4 billion in January, 6.9 percent (±1.1%) below the revised December estimate of $262.7 billion.

Click on graph for larger image in graph gallery.

This graph shows private residential and nonresidential construction spending since 1993. Note: nominal dollars, not inflation adjusted.

Residential spending is 64% below the peak in early 2006, and non-residential spending is 41% below the peak in January 2008.

This is the first time since December 2007 that private residential construction spending has been higher than non-residential spending. Not by much, but that is something I've been expecting.

We will probably see a sluggish recovery in residential spending in 2011 (mostly multi-family), and for residential investment to make a positive contribution to GDP and employment growth this year for the first time since 2005. And that is one of the reasons I think growth (both GDP and employment) will be better in 2011 than in 2010.