Construction Spending Near Decade Low, Well Yippee...the stock market doesn't care

Daniel Indiviglio
The Atlantic
11/1/10

More money was spent on construction in September, revealed a report from the Census Bureau on Monday. But the report was actually a pretty negative one for the sector -- it revised downward the past two months' construction spending significantly. As a result, it has been virtually flat over the past three months, hovering around $800 billion, which is the weakest spending on construction in about a decade.

Here's a chart showing how construction spending has changed since 2000:

You can see how flat it has been over the past couple of months. In September it increased 0.5% to $801.7 billion. Over the past three months, construction spending hasn't risen above its July 2001 level.

September's increase might sound like an improvement, but it's only better than July and August because Monday's report revised downward both those months' tallies. They changed to $798.8 billion and $797.5 billion from $808.6 billion and $811.8 billion, respectively. As you can see, those are pretty big revisions. If spending for August hadn't been revised, then September's result would have meant a 1.2% decline, instead of a 0.5% rise.

Most of September's increase was due to a rise in public construction. Spending on structures by the government rose 1.3% from August. In the private sector, month-over-month spending was flat. This was mostly due to commercial construction remaining virtually unchanged, though residential construction rose slightly, by 1.8%.

Compared to a year earlier, private construction spending was much lower, down 16.8%. Public construction, however, has risen. It's up 1.3%. At this point, any growth in construction spending is clearly being driven by government spending, not firms creating more structures for growth.

See Grandpa's comments: Government reports revised, then revised and revised yet again

Construction Spending: Census Bureau and Commerce Department continue their struggle with adding and subtracting

Welcome to the U.S. Census Bureau/

Department of Commerce.

REVISE...REVISE...REVISE...

Common headline of the day: Construction Spending in U.S. Unexpectedly Rose in September. Of course the number unexpectedly rose given the continual downward revisions of the U.S. Census Bureau/Department of Commerce.

August 2010 construction spending was initially reported at $811.826 billion then revised to $797.457 billion in today's report. Due to the usual overstatement in the initial report, September construction spending beat August.

Do you really think August was an abnormality with respect to measurable downward revisions?

Current Revised/Initial Report/Month

• $797.457 billion/$811.826 billion/ for August
• $798.752 billion/$805.159 Billion/ for July
• $820.198 billion/$$836.012 billion/ for June
• $819.702 billion/$$841.888 billion/ for May
• $869.088 billion/$834.148 billion/ for April
• $824.023 billion/$847.300 billion/ for March
• $815.797 billion/$846.200 billion/ for February
• $841.040 billion/$884.100 billion/ for January

According to the crack number crunching staff of the U.S. Census Bureau/Department of Commerce, construction spending in September 2010 increased 0.5% over August 2010. The predictable lemming-like behavior of the U.S. stock market launches on the perception of great news. CNBC will likely not dig into the Commerce Department's report given all is not yippee and Erin's glass will not be 1/2 full.

Total September Construction is down 10.4% year over year. Total Residential construction is down 5.3% year over year and total Non-Residential construction is down 12.4% year over year. Total PRIVATE CONSTRUCTION is down 16.8% year over year.

Total construction spending for September 2010 remains lower than January through June 2010. Thank God for the government as total Public Construction is up 1.4% year over year.

Welcome to how the U.S. Government assists with launching the market; throw out a figure beating expectations, crank up Queen's "We Are the Champions" as the stock market launches and quietly revise the figure below initial expectations during the next 60 to 90 days. Census Bureau Remedial Math Reports

I've paid my dues -
Time after time -
I've done my sentence
But committed no crime -
And bad mistakes
I've made a few
I've had my share of sand kicked in my face -
But I've come through

Obama to ask Congress for another $50 Billion (too bad for grandchildren...but we have an election to win)

Damn the torpedos and damn the fiscal burden

on our grandchildren...we have an election to win

The initial $787 BILLION stimulus package was merely an appetizer

so let's fill up on a $50 BILLION entree.

By Mike Allen (Politico)
Seeking to bolster the sluggish economy, President Barack Obama is using a Labor Day appearance in Milwaukee to announce he will ask Congress for $50 billion to kick off a new infrastructure plan designed to expand and renew the nation’s roads, railways and runways.

The goals, according to the White House: “Rebuild 150,000 miles of roads — renewing our commitment to the backbone of our transportation system … . Construct and maintain 4,000 miles of rail — enough to go coast-to-coast … . Rehabilitate or reconstruct 150 miles of runway — while putting in place a NextGen system that will reduce travel time and delays.”

The measures include the “establishment of an Infrastructure Bank to leverage federal dollars and focus on investments of national and regional significance that often fall through the cracks in the current siloed transportation programs," and “the integration of high-speed rail on an equal footing into the surface transportation program.”

“To jumpstart job creation, this long-run policy front-loads — through a $50 billion up-front investment — a significant share of the new infrastructure resources,” the White House said in a fact sheet. “As with other long-run policies, the Administration is committed to working with Congress to fully pay for the plan.”

White House chief of staff Rahm Emanuel has been pushing an infrastructure plan in West Wing meetings for weeks. But with the November midterms looming, officials were having trouble finding a way for the effects to be felt immediately.

A White House official said: “Today in Milwaukee, Wisconsin, President Barack Obama will announce a comprehensive infrastructure plan to expand and renew our nation’s roads, railways and runways. This proposal is among a set of targeted initiatives that the president will outline in Cleveland on Wednesday to support our economic recovery and ensure long-term sustainable growth.

“The plan builds upon the infrastructure investments the president has already made through the Recovery Act, includes principles the president put forth during the campaign, and emphasizes American competitiveness and innovation.”

At 3:10 p.m. Eastern time, Obama is to deliver remarks on the economy at Milwaukee Laborfest, in Henry Maier Festival Park.

Here is a White House fact sheet on the plan,

“Renewing and Expanding America’s Roads, Railways, and Runways”:

The President today laid out a bold vision for renewing and expanding our transportation infrastructure – in a plan that combines a long-term vision for the future with new investments. A significant portion of the new investments would be front-loaded in the first year.

This plan would build on the investments we have already made under the Recovery Act, create jobs for American workers to strengthen our economy now, and increase our nation’s growth and productivity in the future. At the same time, the plan would reform the way America currently invests in transportation, changing our focus to enhancing competition, innovation, performance, and real analysis that gets taxpayers the best bang for the buck, while moving away from the earmarks and formula debates of the past. In prior years, transportation infrastructure was an issue that both parties worked on together, and the Administration hopes the same can be true now.

Some of the main provisions of the President’s plan over the next six years include:

• ROADS: Rebuild 150,000 miles of roads – renewing our commitment to the backbone of our transportation system;
• RAILWAYS: Construct and maintain 4,000 miles of rail – enough to go coast-to-coast;
• RUNWAYS: Rehabilitate or reconstruct 150 miles of runway – while putting in place a NextGen system that will reduce travel time and delays.

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Construction spending beats estimates...just don't look at year over year figures

Another economic report data beats the consensus estimates. Construction spending was up 0.1% for June versus the consensus estimate of down 0.8%. May was revised down to -1.00% from the initial report of -0.2%. The equity market does not care about yet another downward prior month revision as that is old data.

Mr. Market has an unbelievable short term memory. When Construction Spending for the month of May was initially released, the -0.2% was well received as it was WAY BETTER than the consensus estimate of -0.9%. One month later, the revision comes in worse than the initial consensus estimate. The revisions to June will be out September 1st. The economic pundits have forecasted a significant recovery for almost two years. Initially, it was a 2nd half 2009 story and when that did not pan out, it became a 1st half 2010 story. Well, that too has been revised to a 2nd half 2010 recovery forecast.

Judge for yourself how far we have recovered when comparing June 2010 to June 2009: Link to complete report: Construction Spending

-7.9% Total Construction
-4.1% Public Construction
         +31.4% Residential
          -5.0% Non-residential
          -21.9% Educational
         +20.1% Transportation
-10.0% Private Construction
          -15.2% Non-residential
          -57.7% Lodging
          -30.5% Office
         +13.0% Transportation
         +1.7% Highway and street
          -32.9% Manufacturing