Monday, January 4, 2010

Construction spending still weak



Not wanting to gloss over bad news, I post this chart of construction spending (both public and private). Although it appears the residential construction sector has hit bottom, nonresidential construction is now clearly declining, and the total of the two is also declining. It's going to be awhile before construction spending stops subtracting from GDP growth. Not all is rosy out there, but I think the list of positives clearly outweighs the negatives.

6 comments:

Bill said...

Scott,

I am a construction lawyer and it looks pretty bad from my vantage point. The architectural/engineering firms have cut about 1/2 of their work forces and the big commercial contractors have little backlog to carry them through 2010. We don't see any recovery here until the start of 2011. I hope the other sectors in the economy can keep things afloat until construction recovers.

Scott Grannis said...

I'm not saying you're wrong, but "it's always darkest before dawn." I see such an array of things improving that I can't imagine the good things won't spread eventually to other sectors.

Cabodog said...

Scott,

Commercial seems to lag the recovery, especially due to the overbuilding that occurred in the boom. When residential construction came to a screeching halt, commercial continued, resulting in huge overhangs of inventory.

I think Bill is correct -- even with a rebound in the economy, I think commercial will take until at least 2011 for the inventory to be absorbed and new projects started.

Your thoughts?

Scott Grannis said...

Cabodog: It would be hard to disagree with you.

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