August Construction Spending Beats Expectations

More

August was a slightly better month for construction spending than July, but it remained very, very weak. After hitting a 9-year low in July, it rose by 0.4% in August, according to the Census Bureau. Constructing spending also surprised economists, who actually expected it to decline further. Although the rise was slight, the sector has been one of the hardest hit with job losses, so even a small increase will help.

Let's start with the chart:

construction spending 2010-08.png

Again, it's easy to see just how far construction spending has fallen. The mountain that peaks in 2006 was mostly due to the real estate bubble. Although the common view is that this was all due to housing, it's important to note that commercial real estate also experienced a mini-bubble due to the general rise in economic activity. Both sub-sectors have suffered since the economy collapsed a few years ago.

Breaking down the components of construction spending, the news looks a little less optimistic. In fact, total private construction spending declined by 0.9% during August -- and was 14.8% lower than a year earlier. The month-over-month drop was mostly due to a 1.4% decline in nonresidential construction spending, but residential spending also fell by 0.3%.

So why did construction ultimately rise? Public construction spending jumped 2.5% compared to July. That was due mostly to non-residential spending, which makes up the vast majority of public construction. The public non-residential component increased by 2.4% during the month.

As mentioned, economists were way off this month. They expected overall construction spending to fall to an annualized rate of around $801 billion. In fact, it rose to $811 billion. Presumably, they didn't anticipate the big bump provided by public construction. If considering just private spending, then their prediction of a decline would have been on the right track.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

Why Are Americans So Bad at Saving Money?

The US is particularly miserable at putting aside money for the future. Should we blame our paychecks or our psychology?


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In