Construction Spending November2008

Anika R. Khan, Economist

[email protected] ● 704-715-0575 January 05, 2009

Construction Spending Fell Far Less Than Expected In November Total construction spending fell 0.6 percent in November with an upward revision to September and October. Residential construction spending fell 4.1 percent and nonresidential construction spending increased 1.0 percent. We now expect nonresidential construction spending to contribute to economic growth in the fourth quarter. Residential Construction Spending

Nonresidential Construction Spending

• Total construction spending fell 0.6 percent in November and is now down 3.3 percent, year-over-year. Much of the drop can be attributed to residential construction spending, which fell 4.1 percent on the month and is now down roughly 23 percent, year-over-year. • Public construction spending rose 1.4 percent on the month.

• Private nonresidential construction spending rose 0.7 percent on the month with large gains in lodging, power and manufacturing. However, while private nonresidential construction spending seems to defy gravity with stronger-than-expected figures, it tends to lag the economy and should contract in the coming quarters.

Total Construction

Private Nonresidential Construction Spending

Month to Month Percent Change

Both Series are 3-Month Moving Averages

4%

40%

3%

3%

30%

30%

2%

2%

20%

20%

1%

1%

10%

10%

0%

0%

0%

0%

-1%

-1%

-10%

-2%

-2%

-20%

-3%

-30%

4%

-10%

01

02

03

04

05

06

07

-30% 95

08

Private Residential Construction Spending Both Series are 3-Month Moving Averages

50%

-20%

3-Month Annual Rate: Nov @ 7.5% Year-over-Year Percent Change: Nov @ 11.9%

Total Construction: Nov @ -0.6% -3%

40%

97

99

01

03

05

07

Private Manufacturing Construction Spending 50%

Both Series are 3-Month Moving Averages

250%

250%

3-Month Annual Rate: Nov @ 41.2% 40%

40%

30%

30%

20%

20%

10% 0%

150%

10%

100%

100%

0%

50%

50%

0%

0%

-10%

-20%

-20% Year-over-Year Percent Change: Nov @ -23.8%

200%

150%

-10%

-30%

Year-over-Year Percent Change: Nov @ 64.8%

200%

-30%

-50%

-50%

3-Month Annual Rate: Nov @ -8.4% -40%

-40% 93

95

97

99

01

03

05

07

-100%

-100% 95

97

99

01

03

05

07

Wachovia Corporation Economics Group publications are distributed by Wachovia Corporation directly and through subsidiaries including, but not limited to, Wachovia Capital Markets, LLC, Wachovia Securities, LLC and Wachovia Securities International Limited. The information and opinions herein are for general information use only. Wachovia does not guarantee their accuracy or completeness, nor does Wachovia assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. © 2009Wachovia Corp.