SURPRISING GAIN LED BY NONRESIDENTIAL SURGE

Construction Spending Monday August 1, 2011

3 2 1 Monthly % Change 0 -1 -2 -3 -4 -5 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11
Monthly % Change Year-on-Year % Change

12 8 4 Yearly % Change 0 -4 -8 -12 -16 -20

Construction spending rose 0.2% in June which was better than expectations for no change. Moreover, upward revisions in the previous two months resulted in moderate gains as opposed to the originally reported declines. Nevertheless, construction spending remains 4.7% below its year ago level and is 36.3% lower than its March 2006 peak. The level of spending remains weak but at least the rate of decline has slowed by more than half over the past year. Residential construction spending is persistently weak, falling by 0.3% in June; down 2.1% from its year ago level and only 3.2% above its cyclical nadir of July 2009. A rebound will be depend ent on reduction of the current large inventory of existing homes. Nonresidential construction spending rose 1.8% in June amid broad based gains. Although nonresidential construction is down 1.3% over the last year and trending lower overall, the pace of decline has slowed substantially. Public construction expenditures fell 0.7% in June and are now off 3.0% on the year. Fading stimulus dollars and difficult budget positions for many state and local governments significantly downgrade the outlook for public spending going forward. Given the current state of the housing market, slower economic conditions and the fiscal crisis in Washington, recovery in any of the three categories of construction spending is still down the road.
Forecast: Consensus**: Actual: 0.0% 0.0% 0.2% Monthly % Change Relative Weight* Jun-11 100.0% 0.2 May-11 0.3 -0.6 0.2 -0.8 1.2 2.2 4.6 -0.4 -1.7 -0.5 0.4 -1.0 1.3 0.6 Apr-11 0.7 -0.6 2.4 4.9 0.1 2.5 -1.0 -1.9 -0.4 0.6 -2.0 -1.5 -3.4 -1.4 PERCENT CHANGE Annual Rates of % Change for Three Six Twelve Five Month Month Month 2010 2009 Year 5.2 -2.7 -4.7 -6.0 -16.2 -8

Ten Year -0.4

Construction Spending Previous estimate Private Construction Residential Nonresidential Commercial Power Office Health Care All Other Public Construction Education Highways & Streets All Others

63.9% 30.5% 33.4% 5.2% 9.4% 2.8% 3.7% 12.3% 36.1% 8.6% 9.7% 17.9%

0.8 -0.3 1.8 3.1 0.6 0.5 2.3 2.3 -0.7 -4.1 -1.6 1.5

14.3 15.8 13.0 36.0 18.0 -6.8 0.7 9.7 -8.8 -23.7 -13.8 2.9

1.8 5.1 -1.0 26.8 -11.2 -12.4 -9.1 3.3 -10.0 -8.4 -18.1 -5.8

-1.7 -2.1 -1.3 2.3 13.0 -10.1 -3.0 -9.0 -9.6 -13.0 -10.4 -7.5

-8.1 -6.3 -9.7 -14.3 11.1 -19.4 -1.8 -20.1 -2.1 -10.6 5.1 -1.5

-21.9 -15.0 -27.0 -40.6 -5.2 -43.5 -21.9 -27.1 -3.7 -10.3 -3.0 -0.2

-12.2 -19.1 -1.0 -13.2 19.4 -9.7 0.7 -1.6 4.0 -0.5 4.5 6.3

-2.4 -4.0 -0.8 -5.7 10.6 -8.9 4.2 -1.8 4.7 #N/A #N/A #N/A

Source: Bureau of the Census, Department of Commerce via Haver Analytics. Data, graph & table courtesy of Insight Economics, LLC. **Bloomberg 2011 HousingMatrix, Inc. | http://www.HousingMatrix.com | All rights reserved. Reproduction and/or redistribution are expressly prohibited. Hot Sheet is a registered trademark of HousingMatrix, Inc. Information herein is based on sources we believe to be reliable, but its accuracy is not guaranteed.