Current economic indicators table

 

Construction spending inches downwards

Latest available: December 2006
Release date: January 4, 2007

 

Fixed income and currency market reaction

Construction spending fell by 0.2% in December, above consensus calling for a 0.5% decline in the month. October's figure was upwardly revised to show a 0.3% decline (previous 1.0%) drop. 

 

Implications

Private residential spending fell 1.6% on the month, contrary to housing starts, which increased 6.7% and new home sales which rose 3.4%.  On a year-over-year basis, private residential spending is down 11.1%.  Private non-residential spending increased, rising 1.4% in October while on a year-over-year basis, private non-residential spending is up a strong 18.0%, consistent with RBC's view that non-residential construction will proceed at a decent clip in 2007.  On the whole, private spending was down 0.6% while public spending increased 1.0%.

 

Today's residential spending figures suggest that residential construction will likely again prove to be a drag on growth in the quarter.  Other housing market indicators have also signaled weakness in the quarter as the NAHB housing market index remains historically low and building permits continue to drop.  That said, the Fed has acknowledged that the housing market is a weak spot in the economy and therefore this report is unlikely to prove much of a surprise to the policy makers.