by Calculated Risk on 11/03/2008 10:00:00 AM

The Census Bureau reported this morning that private non-residential construction increased slightly in September from August, but spending is still below the peak in June 2008. I expect that non-residential investment will decline sharply over the next year or two.

From the Census Bureau: September 2008 Construction at $1,060.1 Billion Annual Rate

Spending on private construction was at a seasonally adjusted annual rate of $751.7 billion, 0.1 percent above the revised August estimate of $751.1 billion. Residential construction was at a seasonally adjusted annual rate of $336.5 billion in September, 1.3 percent below the revised August estimate of $340.8 billion.

Click on graph for larger image in new window.

The graph shows private residential and nonresidential construction spending since 1993.

Nonresidential spending had been strong as builders completed projects, but there is substantial evidence of a looming slowdown - less lending for new projects, less work for architects - and it appears the expected slowdown in non-residential spending has arrived.


The second graph shows the year-over-year change for private residential and non-residential construction spending.

The YoY change in non-residential spending is starting to slow down and will probably turn negative later this year or early in 2009.

It now looks like investment in non-residential structures will negatively impact GDP in Q4. This had been one of the few bright spots for the economy.