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What Is Up With Construction?

I pick a topic each week where the data seems interesting. This week the construction sector presented two dissimilar and opposing views for analysts.

Construction Spending Declines In August

The headlines say construction spending was down, and was significantly below expectations. This series is now in contraction after almost 5 years in expansion.

Public construction continues go deeper in contraction, whilst private construction is now showing signs of a short term down trend. Overall, however - construction is now contracting after spending nearly 5 years expanding year-over-year.

The backward revision for the previous months were upward. This was well below expectations. Continued headwinds to 3Q2016 GDP.

Econintersect analysis:

  • Growth deceleration 0.9 % month-over-month and down 0.1 % year-over-year.
  • Inflation adjusted construction spending down 0.8 % year-over-year.
  • 3 month rolling average is 3.2 % BELOW the rolling average one year ago, and decelerated 1.0 % 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 was up.
Unadjusted Construction Spending - Three Month Rolling Average Compared to the Rolling Average One Year Ago

source: US Census Unadjusted data

And Now look at Construction Employment

Compare the year-over-year growth rates of construction employment vs construction spending.

How can this situation exist in the same universe?

Most know the relationship between labor and total installed costs do not vary much between the various construction sectors. It cannot be due to automation as the reverse would be true.

So one can only guess that one or both of the data sets is wrong - or they have categorized those working in political campaigns as construction workers :).

Other Economic News this Week:

The Econintersect Economic Index for October 2016 insignificantly declined with the economic outlook remaining weak. The index remains near the lowest value since the end of the Great Recession. Some sectors of the economy continue to give recession warning flags. Employment growth forecast indicates little change in the rate of growth.

Bankruptcies this Week: Privately-held Garden Fresh Restaurants (dba Souplantation, Sweet Tomatoes), Privately-held Hanson Permanente Cement (f/k/a Kaiser Cement), Multimedia Platforms Worldwide

Please visit our landing page for a summary of all of our analysis this past week.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.