Another Red Flag: Construction Spending Declined In May

Overall construction spending declined in May, and private construction spending, both residential and non-residential, also decreased. From the Census Bureau: May 2010 Construction at $841.9 Billion Annual Rate

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during May 2010 was estimated at a seasonally adjusted annual rate of $841.9 billion, 0.2 per cent below the revised April estimate of $843.3 billion.

Spending on private construction was at a seasonally adjusted annual rate of $536.3 billion, 0.5 per cent below the revised April estimate of $538.9 billion. Residential construction was at a seasonally adjusted annual rate of $260.8 billion in May, 0.4 per cent below the revised April estimate of $261.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $275.6 billion in May, 0.6 per cent below the revised April estimate of $277.2 billion.

chart

Calculated Risk

Click on graph for larger image in new window.

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

Private residential construction spending appears to have bottomed in early 2009, but has only increased gradually since then. Residential spending is now 61% below the peak of early 2006.

Private non-residential construction spending is now 33% below the peak of late 2008.Private residential construction spending will decline sharply in July as builders complete homes in June.

Based on the Architecture Billings Index, non-residential spending will also decline all year – and well into 2011.

Residential spending will probably exceed non-residential later this year (or early 2011), but that will be mostly because of weakness in non-residential construction, as opposed to any significant increase in residential spending.

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