March 2010 Construction Spending Better than Expected…Really???

The media is euphoric as evidenced by their headlines:
March construction surges…
U.S. construction spending rises in March…
U.S. construction defies expectations…
U.S. construction spending exceeds expectations…
U.S. construction spending rises into positive territory…
It is time to get ready for the construction recovery…

Given the headlines, one would surmise there is not a hammer left on the shelf and traffic delays abound as all previously laid off construction workers are heading back to the jobsites. Quick, you need transfer from the university to trade school. Well, not exactly…

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during March 2010 was estimated at a seasonally adjusted annual rate of $847.3 billion, 0.2 percent above the revised February estimate of $845.5 billion. The originally reported figure for February 2010 was $846.2 billion annual rate. Had the government not revised the figure lower, the March figure would be a whopping 1/$846.2 increase. Don’t leave the campus yet, grandpa is not done.

The March figure is 12.3 percent below the March 2009 estimate of $966.7 billion. During the first 3 months of this year, construction spending amounted to $179.9 billion, 14.0 percent below the $209.2 billion for the same period in 2009.

How can that be, the equity market is up 160 points of light?

The original January 2010 figure was $884.1 billion. Yes, the government also revised a 3 month old figure to $863.5 billion. The March 2010 figure is $16.2 billion less than the January 2010. Surely the equity market knows that the revisions are absolute and we are good to go! Well, not exactly…

U.S. Department of Commerce note in this month’s report:
In the May 2010 press release, revisions to unadjusted and seasonally adjusted data will revise back to January 2004 to incorporate and benchmark to the 2008 detailed structures data from the U.S. Census Bureau’s Annual Capital Expenditures Survey.

Back to January 2004! That is almost 6 ½ years! Apparently the equity market in its infinite wisdom and manipulative ways already priced in over ½ a decade worth of revisions.

Oh grandpa, you are sounding a bit cynical; share some specifics from the report and compare it to a year ago especially given the BILLIONS of debt the government has shoveled on to our grandchildren. CNBC, Jim Cramer, Tim Geithner, Larry Summers and Christina Romer continue to express their bullishness about the recover and President Obama just stated; “nation’s economic heartbeat is strong”!

Surely lodging has improved given the monumental job creation which yields vacations and business travel. Likewise, office construction must be off the charts as the mass number of new employees need a place to sit. Finally, check out manufacturing as surely products are flying off the shelves given recent manufacturing survey results.
March 2010 versus March 2009 Value of Construction Put In Place
-59.7% Lodging
-34.1% Office
-28.3% Manufacturing
 
Sorry grandkids, grandpa is trying his best to remove some of the burden off your shoulders however not only does our government continue to spend, it is become impossible to identify a positive return on the BILLIONS. Grandpa will not quit the quest.