Monday, March 2, 2009

NONRESIDENTIAL Construction Spending Bad News

The Dept of Commerce says that (seasonally adjusted) NONRESIDENTIAL construction spending declined more in January than it did in the entire fourth quarter.

That is bad news because:
  • nonresidential construction had been increasing during most of the recession
  • the stock of nonresidential buildings in place is already pretty low, thanks to the housing boom.

We can do without housing construction for a while, but not without nonresidential building UNLESS our economy is due to shrink.


The economy did shrink 1.6% in Q4, I have not yet done the work required to determine whether

  • the low construction spending in January is just an adjustment to the Q4 reality, or
  • it reflects even worse expectations about the future, or
  • it reflects the onset of a credit crunch.

1 comment:

Alberto said...

Prof,

Could this be the result of private expectations that gov't borrowing will crowd out private access to credit (given the massive spending increases proposed in Washington)?