Construction: Falling Out of Bed on Downward Revisions

The rosy summary in the October Census Construction report -- “nearly the same as (±1.6%)* the revised September estimate” -- would give a more accurate picture of construction if it stated, “October 2009 construction spending down 3% from original September estimate.”

The original September estimate was revised down 3% from an annual rate of $940 billion to $910 billion. These changes are shown in the table below. Note that the September revision is greater than the 90% confidence interval of ±1.6% for the October estimate.

Change from September Construction Spending Estimate
	Oct	Sep	Aug	Jul	Jun
September Estimate		940,280	932,952	934,235	945,137
October Estimate	910,767	910,366	925,524	934,235	945,137
Change from last month estimate	NA	-3%	-1%	0%	0%

The reality is that construction spending is falling out of bed.

As shown in the table below, year-to-date spending has declined -13% compared to the current October estimate of -14%. The revised September numbers are down -16% from 2008. The initial estimate for September showed a decline that was in line with the trend at -13%.

The revisions show the trend is clearly accelerating, as would be expected given the current declines in commercial and residential real estate values and the reluctance of banks to lend to new projects.

Any takers that the October numbers will not be revised down to -16% or worse when the November report is issued?

Construction Spending Change from Last Year October Release
	Annualized
	Oct	Sep	Year to Date
2008	1,064,103	1,081,182	908,880
2009	910,767	910,366	794,024
Change from last year	-14%	-16%	-13%

*90% confidence interval.

Disclosure: None for this post

Comments

[Old Trader]

It seems that the various road improvement projects that got stimulus funding (the easier, "shovel ready" ones) are just about finished, and there's nothing in the pipeline to replace those, is what I'm hearing.

2009 Dec 02 07:14 PM

[Jeff Nielson]

This is literally only half the story. While millions of already-foreclosed properties being held off the market by U.S. banks, the U.S. government has been busy creating a NEW, subprime sector for the U.S. housing market, and a NEW housing "bubble".

"The U.S. Government's Zero Down-payment Mortgages"
www.bullionbullscanada...

2009 Dec 08 10:49 AM