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November Construction Dips; Up Strong Year-Over-Year


The U.S. Census Bureau of the Department of Commerce announced that construction spending during November 2015 was estimated at a seasonally adjusted annual rate of $1,122.5 billion, 0.4 percent (±1.5 percent) below the revised October estimate of $1,127.0 billion. The November figure is 10.5 percent (±1.8 percent) above the November 2014 estimate of $1,016.1 billion.

During the first 11 months of 2015, construction spending amounted to $1,011.9 billion, 10.7 percent (±1.2 percent) above the $913.9 billion for the same period in 2014.

In November, the estimated seasonally adjusted annual rate of public construction spending was $294.3 billion, 1.0 percent (±2.5 percent) below the revised October estimate of $297.3 billion. Educational construction was at a seasonally adjusted annual rate of $71.2 billion, 5.0 percent (±3.9 percent) above the revised October estimate of $67.8 billion.

Highway construction was at a seasonally adjusted annual rate of $90.7 billion, 1.3 percent (±5.6 percent) below the revised October estimate of $92.0 billion.

Spending on private construction was at a seasonally adjusted annual rate of $828.2 billion, 0.2 percent (±0.8 percent) below the revised October estimate of $829.7 billion. Residential construction was at a seasonally adjusted annual rate of $427.9 billion in November, 0.3 percent (±1.3 percent) above the revised October estimate of $426.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $400.3 billion in November, 0.7 percent (±0.8 percent) below the revised October estimate of $402.9 billion.

According to the Census Bureau, “spending for January 2005 through October 2015 has been revised to correct a processing error in the tabulation of data on private residential improvement spending." The revision to residential improvements was massive – October’s spending level, for example, was $28 billion higher than previously estimated.

"For now, the revision will not affect the residential improvements estimate in the national income accounts since it is based on other source data," said Patrick Newport, U.S. economist, IHS Global Insight. "However, the BEA will incorporate the revision in its annual revisions, which come out in late July. In calculating improvements over history, the BEA uses a weighted three-year moving average of the improvements estimates from the Census Bureau construction spending (value put in place) survey. The upward revision to spending in 2014 is enough to raise growth that year from 2.4 percent to 2.6 percent to 2.7 percent. The revisions are likely to boost growth for 2015 as well.

"Single-family construction is making steady monthly gains heading into 2016," Newport continued. "Spending on multifamily structures is back to normal and plateauing. IHS Global Insight expects that residential investment will contribute 0.27 percentage points to real GDP growth in 2015, after adding .05 percent in 2014 (although the 2014 contribution will likely be revised up substantially in July.)

"Non-residential construction, which grew at a spectacular 42.8 percent annual rate in the second quarter as spending on manufacturing plants soared, has plateaued," Newport concluded. "A key category to watch is manufacturing construction, which is at elevated levels (mostly because of spending on chemical plants) – and is set to land hard, if not crash, sometime in 2016. Public construction also caught fire in the second quarter, increasing at a 30.8 percent annual rate. It slowed in the third quarter and is poised to drop in the fourth."