by Calculated Risk on 8/01/2006 02:42:00 PM

The Census Bureau reported:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during June 2006 was estimated at a seasonally adjusted annual rate of $1,217.3 billion, 0.3 percent above the revised May estimate of $1,213.8 billion. The June figure is 6.8 percent above the June 2005 estimate of $1,139.9 billion.

During the first 6 months of this year, construction spending amounted to $569.3 billion, 8.5 percent above the $524.8 billion for the same period in 2005.

I'd like to focus on the longer term trend.


Click on graph for larger image.

This graph shows construction spending, in Billions of dollars (SA, annual rate) for the three main categories of spending: Private Residential and Nonresidential, and Public spending since 1993.

Private Nonresidential and Public spending have picked up recently, as Private Residential Spending has decreased. Some analysts are hoping that increased Nonresidential spending will mostly offset the decrease in residential spending going forward. This seems unlikely.

The second graph presents the same data as a percent of GDP. Private Nonresidential spending, as a percent of GDP, is off from the highs of the late '90s, but spending is already near the pace of the mid-90s. Perhaps Private Nonresidential will increase some more, but if Residential spending falls back to 3.5% - 4.0% of GDP, Nonresidential spending will only offset a small portion of this decrease.

Public construction spending, as a percent of GDP, is already near the highs of the last 13 years (data collection started in 1993), and any further increase will be minor in comparison to the probable decrease in future residential spending.