U.S. Construction Spending Down Significantly

U.S. construction spending flat in October, the headlines say. However, as was noted in this story, that is misleading. The reason for that is that the September number was revised down from +0.8% to -1.6%, meaning that the reported October number was actually 2.4% lower than the initially reported September number. The downward revision of construction spending will probably mean that the third quarter GDP number will again be downwardly revised.

Another thing noteworthy is the very different trends for residential construction and nonresidential construction. Residential construction is starting to recover, though it is still at a low level and will likely remain so. Nonresidential private construction meanwhile is dropping fast. The October number was nearly 6% lower than the third quarter average, meaning that even if it is unchanged in November and December, it will drop at an annual rate of 22% during the third quarter. And it is more likely that the drop will continue in November and December, meaning that nonresidential construction (which in GDP reports is the category “structures" under fixed nonresidential investments) will more likely drop at an annual rate of more than 25%.