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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
2013p
Mar
2013r
Feb
2013r
Jan
2013
Dec
2012
 In Millions of Dollars
Total Construction
860,778 857,745 864,685 858,145 893,634
 Avg Last 4-Mos vs Dec 2012         = $860,338 v 3.7%
Residential  308,328 309,039 303,872 293,342 303,549
Avg Last 2-Mos vs Dec-Feb Avg    = $308,684 ^2.8%          
Nonresidential  552,450 548,706 560,814 564,802 590,086
     Lodging 12,850 12,810 12,314 11,202 11,608
     Office 36,108 36,918 36,937 37,465 37,977
     Commercial 47,480 47,163 48,544 47,468 46,432
     Health care 39,581 39,335 40,134 39,403 39,943
     Educational
75,525
77,731
82,209
79,831
84,543
     Religious 3,549 4,000 3,828 3,789 3,745
     Public safety 9,645 9,132 9,521 9,337 9,570
     Amusement and recreation 13,935 14,204 14,314 14,516 15,056
     Transportation 38,987 38,755 39,113 39,086 38,921
     Communication 15,486 16,233 15,667 17,129 16,995
     Power 92,598 85,928 88,538 99,042 116,381
     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
     Water supply 13,397 13,502 13,723 13,411 13,416
     Conservation&Development 5,395 5,715 6,268 5,965 5,956
     Manufacturing 49,651 50,981 50,723 50,153 52,978
 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.

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