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But other segments of the construction are hot.
Residential construction is starting to make people nervous. Total spending on residential construction – 99% is "private" and not "public" spending – down 8.4% from last year, the sixth consecutive month of declines year to year, to reach a seasonally adjusted annual rate of $ 507 billion. according to the Census Bureau this morning. This was a decrease of 11% from the peak of April 2018 and the lowest annual rate since December 2016.
Residential construction spending has never fully recovered after the 65% collapse that followed the peak of February 2006 (annual rate of $ 684 billion), which led 22 months later to the official date. beginning of the Great Recession. For months, residential construction spending has been heading south again in a bewildering way:
Construction spending is a major factor in the US economy, with significant local consequences, including high-paying jobs that benefit local businesses, from car dealerships to sandwich shops.
In 2006, residential construction accounted for 4.5% of nominal GDP ($ 13.8 billion). When residential construction collapsed from $ 650 billion in 2006 to $ 250 billion in 2009, the economy has lost a lot. But he does not play that kind of huge role anymore. By 2018, residential construction had fallen to about 2.2% of nominal GDP ($ 20.5 billion) and the current slowdown in residential construction was less noticeable.
Overall construction spending – thanks to the reduced role of residential construction spending – decreased only 0.8% in March compared to March last year, for the second consecutive month of declines in 39, one year on the other, at a seasonally adjusted annual rate of $ 1.28 billion:
The annual rate means that at this rate, construction expenses for the entire year will rise to $ 1.28 trillion.
With residential construction falling sharply, noResidential construction has filled the gaps – and much of the heavy load, so to speak, has been done by the public, by the federal, state, and municipal governments (bridges, sewer projects, administrative buildings, etc.):
- Non – residential private construction (red line) rose 2.1% from one year to the next to reach an annual rate of $ 461 billion.
- Non-residential public construction (black line) increased 9.0% year-over-year to $ 315 billion annually
During the Great Recession, non-residential private construction expenditures collapsed by more than 40% in a short time, rising from an annual rate of 420 to 240 billion dollars. Public works progressed until March 2009, then when states and municipalities were taken by the fiscal consequences of the Great Recession, while California was sorely lacking money and had to pay bills with bills. IOUs for the second time in its history, projects were reduced or canceled, and public spending on construction began to decline.
It took 10 years and 10 years of inflation to bring public construction back to its March 2009 level. This was boosted by a surge that began in late 2017: during these 15 months, public construction spending have jumped 11%. .
Private non-residential construction expenditures are increasing at a faster pace in some segments and are declining at a faster pace and one segment is the "commercial" sector, primarily warehouses and retail – the effects of the melting of the brick and mortar mortar. mortar on the construction of shopping centers.
The following are the most important segments, with growth rates from one year to the next in March (amounts expressed in annual rates adjusted for seasonal variations):
- Power (blue line in the chart): + 4.2%, to 95 billion dollars
- Commercial (red line): -8.6%, to reach 82 billion dollars
- Manufacturing (black line): + 10.9%, to reach 70 billion dollars
- Office (purple): + 7.5%, to 67 billion dollars,
- Hosting (green): + 8.0%, to $ 33 billion
- Health care (yellow): + 2.4%, to 34 billion dollars.
The construction of manufacturing facilities (black line) rose sharply from 2011 and peaked and reversed in mid-2015 when the oil crisis hit equipment manufacturers and supplies and that truck builders have been affected by the transportation recession. It reached its low point in May 2018 and has since begun to recover.
So, what could tilt overall construction spending into a more pronounced decline? A recession could and will be. But aside from this scenario, public construction seems to be on the path to growth, especially if an important infrastructure plan is adopted by Congress. And most of the larger segments of non-residential private construction are also on the growth path. Their growth will have to compensate for the decline in commercial and residential construction so that construction expenditures do not decline more rapidly.
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