The headlines say construction spending was unchanged and below expectations. Our view is worse than the headlines.

Analyst Opinion of Construction Spending

There was significant backward revision starting in January 2015. The rolling averages declined. Also note that inflation is grabbing hold – and the inflation adjusted numbers are worse than the headlines – but still better growth than real GDP.

The employment gains year-over-year are now better than the year-over-year improvement in construction spending.

Econintersect analysis:

  • Growth decelerated 0.8 % month-over-month and up 4.7 % year-over-year.
  • Inflation adjusted construction spending up 3.6 % year-over-year.
  • 3 month rolling average is 5.6 % above the rolling average one year ago which is a 0.4 % deceleration month-over-month. As the data is noisy (and has so much backward revision) – the moving averages likely are the best way to view construction spending.
  • Backward revision for the last 3 months were strongly upward..

     

    • US Census Analysis:

  • Unchanged month-over-month and up 4.5 % year-over-year.
  • Market expected from Bloomberg / Econoday 0.0 % to 0.9 % month-over-month (consensus +0.5) versus the 0.0 % reported

    • Construction spending (unadjusted data) was declining year-over-year for 48 straight months until November 2011. That was four years of headwinds for GDP.

    Indexed and Seasonally Adjusted Total Construction Spending (blue line) and Inflation Adjusted (red line)

    This month’s headline statement from US Census:

    Construction spending during May 2017 was estimated at a seasonally adjusted annual rate of $1,230.1 billion, nearly the same as (±2.5 percent)* the revised April estimate of $1,230.4 billion. The May figure is 4.5 percent (±2.5 percent) above the May 2016 estimate of $1,177.0 billion. During the first 5 months of this year, construction spending amounted to $469.2 billion, 6.1 percent (±1.3 percent) above the $442.4 billion for the same period in 2016.

    PRIVATE CONSTRUCTION – Spending on private construction was at a seasonally adjusted annual rate of $943.2 billion, 0.6 percent (± 0.7 percent)* below the revised April estimate of $949.3 billion. Residential construction was at a seasonally adjusted annual rate of $509.6 billion in May, 0.6 percent (±1.3 percent)* below the revised April estimate of $512.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.6 billion in May, 0.7 percent (± 0.7 percent)* below the revised April estimate of $436.7 billion.

    PUBLIC CONSTRUCTION – In May, the estimated seasonally adjusted annual rate of public construction spending was $286.9 billion, 2.1 percent (±5.3 percent)* above the revised April estimate of $281.0 billion. Educational construction was at a seasonally adjusted annual rate of $74.3 billion, 5.1 percent (±3.3 percent) above the revised April estimate of $70.7 billion. Highway construction was at a seasonally adjusted annual rate of $90.6 billion, 0.9 percent (±16.9 percent)* below the revised April estimate of $91.5 billion.

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