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September 2017 Headline Construction Spending Growth Slows

Summary

Construction spending seems to be in a long term decline.

Public construction spending has been in contraction for over one year.

Currently even private spending is declining.

The headlines say construction spending was up and near expectations. Our view is that this does not consider inflation, and the trend lines clearly show a slowing sector.

There continues to be significant backward revision to the data - this month was slight and did not change the trends. The rolling averages declined. Also note that inflation is grabbing hold - and the inflation adjusted numbers are showing contraction in this sector.

The employment gains year-over-year are near the same than the year-over-yeargrowth in construction spending..

Econintersect analysis:

  • Growth decelerated 1.2 % month-over-month and up 1.1 % year-over-year.
  • Inflation adjusted construction spending down 3.3 % year-over-year.
  • 3 month rolling average is 1.9 % above the rolling average one year ago which is a 0.9 % 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 mixed

US Census Analysis:

  • Up 0.3 % month-over-month and up 2.0 % year-over-year.
  • Market expected from Bloomberg / Econoday -0.5 % to 0.5 % month-over-month (consensus +0.1) versus the +0.3 % 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.

This month's headline statement from US Census:

Construction spending during September 2017 was estimated at a seasonally adjusted annual rate of $1,219.5 billion, 0.3 percent (±1.3 percent)* above the revised August estimate of $1,216.0 billion. The September figure is 2.0 percent (±1.6 percent) above the September 2016 estimate of $1,195.6 billion. During the first 9 months of this year, construction spending amounted to $917.0 billion, 4.3 percent (±1.2 percent) above the $879.6 billion for the same period in 2016.

PRIVATE CONSTRUCTION - Spending on private construction was at a seasonally adjusted annual rate of $942.7 billion, 0.4 percent (±1.0 percent)* below the revised August estimate of $946.2 billion. Residential construction was at a seasonally adjusted annual rate of $515.4 billion in September, nearly the same as (±1.3 percent)* the revised August estimate of $515.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $427.3 billion in September, 0.8 percent (± 1.0 percent)* below the revised August estimate of $430.6 billion.

PUBLIC CONSTRUCTION - In September, the estimated seasonally adjusted annual rate of public construction spending was $276.8 billion, 2.6 percent (±2.3 percent) above the revised August estimate of $269.8 billion. Educational construction was at a seasonally adjusted annual rate of $71.9 billion, 5.2 percent (±2.8 percent) above the revised August estimate of $68.3 billion. Highway construction was at a seasonally adjusted annual rate of $84.3 billion, 1.1 percent (±5.6 percent)* above the revised August estimate of $83.4 billion.

Unadjusted Private Construction Spending Year-Over-Year (blue line) and Unadjusted PublicConstruction Spending Year-Over-Year (red line)

Private construction had been fueling construction growth.

Other Economic News this Week:

The Econintersect Economic Index for November 2017 returned to the range of normal growth after last months brief dip. Still, the economic fundamentals are somewhat chaoic. Six-month employment growth forecast is now indicating slowing growth.

Bankruptcies this Week from bankruptcydata.comPrivately-held M & G USA and 11 affiliated Debtors - including parent Luxembourg-based Mossi & Ghisolfi International S.a r.l., Armstrong Energy, Privately-held Bestwall

Please visit our landing page for a summary of all the analysis published over the past week.

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