The most brutalized industry during the recession is improving, but very slowly. Construction spending grew for the third straight month in November, by 0.4%, according to the Census Bureau. That follows increases of 0.7% and 1.2% in October and September, respectively. While this is a positive trend for the sector, this improvement is too slow to get very excited about.

Let's start with the chart:

construction spend 2010-11 cht1.png

This tells most of the story. You can see how far construction has fallen, and how little the recent rise in spending has really helped.

Let's break down November's $3.5 billion annualized increase from October:

construction spend 2010-11 cht2.png

Residential spending, which drove the increase in spending for October, also rose in November. It made up about half the gain. This continues to be a little bit puzzling, considering how much existing home inventory buyers still have to choose from. Perhaps the foreclosure slowdown caused by banks fixing their procedures continues to conjure up additional demand for new construction.

But the the components of nonresidential construction shown above also provide an interesting observation -- the increase was entirely driven by government spending. In fact, public construction outpaced the rise in residential spending.

If you dig into the data, you can quickly discover that, within nonresidential construction, public spending has outpaced private spending for five months straight. So if the government was aggressively building new structures, then the increase in construction spending would be even more muted. Recently, private firms are not spending more on construction, which implies that they aren't expanding much at this time.

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