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Construction Spending Dips in January; Rises Year-Over-Year


The U.S. Census Bureau of the Department of Commerce announced that construction spending during January 2015 was estimated at a seasonally adjusted annual rate of $971.4 billion, 1.1 percent (±1.2 percent) below the revised December estimate of $982.0 billion. The January figure is 1.8 percent (±1.6 percent) above the January 2014 estimate of $954.6 billion.

In January, the estimated seasonally adjusted annual rate of public construction spending was $273.8 billion, 2.6 percent (±2.0 percent) below the revised December estimate of $281.1 billion. Educational construction was at a seasonally adjusted annual rate of $58.9 billion, 3.4 percent (±4.1 percent) below the revised December estimate of $60.9 billion.

Highway construction was at a seasonally adjusted annual rate of $88.3 billion, 0.6 percent (±4.8 percent) above the revised December estimate of $87.8 billion.

Spending on private construction was at a seasonally adjusted annual rate of $697.6 billion, 0.5 percent (±1.0 percent) below the revised December estimate of $700.9 billion. Residential construction was at a seasonally adjusted annual rate of $351.7 billion in January, 0.6 percent (±1.3 percent) above the revised December estimate of $349.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $345.9 billion in January, 1.6 percent (±1.0 percent) below the revised December estimate of $351.5 billion.

This was a disappointing report, according to Patrick Newport and Stephanie Karol, economists at IHS Global Insight.

“Residential investment was the one bright spot, adding 0.6 percent at the beginning of the year. However, spending dropped month-on-month in almost every private nonresidential and public-spending category. The across-the-board decreases in both private and public nonresidential spending suggest that snowstorms in January played a role in depressing spending,” they said.

“Two of the three pieces of nominal residential investment are performing well relative to one year ago. New single-family spending rose 9.7 percent since January 2015, while spending on new multifamily structures added 29.8 percent over the same period. Fortunately, the third piece is residential improvements, which is estimated rather than measured. Judging by the number of residential remodelers currently at work, the Census series probably understates the true value of residential improvements. Most categories of private non-residential construction fared poorly in January. Only the manufacturing and communication sectors managed to post monthly increases. In year-on-year terms, seven out of 11 categories are still growing,” they said.

“Public construction spending has been bouncing around over the past several months. On net, this category has laid a goose egg over the past four months: increases in January and November have exactly offset the declines from October and December. Revisions in this report should add $0.6 billion to fourth-quarter real GDP growth. The difference is small enough to keep growth at a 2.2 percent annualized rate,” Newport and Karol concluded.