Total US Construction Spending Shows Signs of Stalling
Total Construction Spending growth has stalled in the US economy. It accounts for nearly half of GPDI, and is a significant part of the reason why GDP Growth has been sluggish. This category along with Consumer Spending is the spark we need to spur the economy out of its doldrums.
Obviously, the major reason why spending on major investment in the residential and non-residential structures has stalled is the lack of confidence in the economy, both consumer and small business. In a previous post, we have finally seen an upturn in sentiment indexes to post-recession highs, but it will not translate to spending for months to come. It doesn’t not help that US Banks have tightened their credit standards in the aftermath of mortgage defaults and small business failures. We are still seeing rising foreclosures in the US residential market.
Although the Feds are stimulating this sector of the economy through buy-backs of mortgage-backed loans, the Excess Cash remains in the banks and other financial institutions as reserves, propping their balance sheets, but not releasing cash into the economy as consumer or small business loans. It also does not help matters that Corporations are retaining all of their excess cash on their books to save for a rainy day.
Let’s take a look at recent trends in this sector of the economy:
|Type of Construction:||Apr
|In Millions of Dollars|
|Avg Last 4-Mos vs Dec 2012 = $860,338 v 3.7%|
|Avg Last 2-Mos vs Dec-Feb Avg = $308,684 ^2.8%|
|Amusement and recreation||13,935||14,204||14,314||14,516||15,056|
|Highway and street||76,802||76,366||78,058||76,660||77,578|
|Sewage & waste disposal||21,462||19,932||20,923||20,345||21,298|
|Note: The 2 segments impacting the change from Dec’12 is Educational & Power|
We have regressed from the turn of the Century’s meteoric rise in construction spending during the Bubble years (2003 – 2007). And, we are getting back to the new normal levels of spending in this industry. The question is whether we continue transgressing or return to a slow growth trend? I believe that it will turn back up during the balance of 2013. After that, the business cycle contraction is expected to take hold.