The Census Bureau said that construction spending decreased 0.3 percent in November, its first decline since March. The decrease was largely due to lower levels of activity in the nonresidential sector, which decreased 0.7 percent and was negative four of the past six months. With businesses anxious about the impending fiscal cliff and tighter government budgets dampening public sector spending, nonresidential activity has been soft at best for much of the second half of 2012.

This has definitely been true in the manufacturing sector, which had seen its construction spending levels fall 2.0 percent since September. With at least some of the uncertainties surrounding the fiscal cliff over, I would expect for these figures to improve moving into 2013 if sales improve and the global economic environment stabilizes.  As a sign that manufacturers have been willing to invest for the future, increased construction spending earlier in the year helped to push up year-over-year activity by 5.1 percent.

Looking specifically at the November numbers, the one bright spot was the residential sector, with construction spending up 0.4 percent for the month and private sector housing activity up 19.0 percent since November 2011. On the private sector nonresidential side, construction was down across-the-board, with only transportation and communications sector activity higher.

Public sector nonresidential spending was off 0.5 percent, but it was more mixed. Sectors with increased public sector activity included commercial, power, sewage and waste disposal, highway and street, and transportation projects. The largest monthly declines were in conservation and development, amusement and recreation, office, water supply, and public safety projects.

Chad Moutray is the chief economist, National Association of Manufacturers.

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