Reported construction spending for March (yes we are still looking at first quarter data), was -0.2%. However, the Census Department revised February construction spending from 0.8% to 1.8%.
These construction reports are so volatile and so frequently revised they are nearly worthless except for entertainment purposes. Nonetheless, let’s have a closer look, including a detailed look weather-related effects.
Construction Spending Volatility
Bloomberg Econoday comments on construction volatility.
Data on construction spending are subject to unusual volatility, evident in today’s report which came in far below expectations, at minus 0.2 percent vs Econoday’s consensus for a 0.5 percent gain. These results for March, however, are offset by a 1.0 percentage point upward revision to February which now stands at a very strong 1.8 percent.
March’s weakness is tied to a sharp 1.3 percent decline in the private nonresidential component, where spending was especially weak for commercial units as well as office units. Public spending was also weak with educational building down for a 2nd straight month. The positives in the report are in housing with multi-family units extending their strong run with a 2.0 percent monthly gain, supported by a gain for single-family units and another strong month for home improvements.
It’s hard to get a gauge on this report because of its revisions and volatility, and the general weakness in nonresidential construction contrasts with the enormous strength of investment in nonresidential structures in Friday’s first-quarter GDP report. The housing side is more clear with gains backed up by strength in underlying permits and strong demand for new housing. Next up on the construction sector will be Friday’s employment report and construction payrolls which have been mostly solid so far this year.
March Revisions vs February
Revision Synopsis
- December: Unrevised at 1,188,941 Hooray!
- January: Revised from 1,183,840 to 1,198,779
- February: Revised from 1,192,822 to 1,220,735
The January revision from -0.4 to +1.3 was even larger than the positive revision in February.
If we just compare February as reported in February to February as reported in March, the percentage increase is 2.3%, not reported 1.8% as the revisions build on each other.
Weather Effect?
This was a strong report and even stronger than it looks at the first glance. However, I caution everyone to not read too much into this strength.
December was unusually cold. January was unusually warm as was February. Seasonal adjustments do not factor in weather.
Second Warmest February in 123 Years!
Please consider Assessing the U.S. Climate in February 2017.
During February, the average contiguous U.S. temperature was 41.2°F, 7.3°F above the 20th century average. This ranked as the second warmest February in the 123-year period of record. Nearly one-quarter of the U.S. was record warm in February. Only February 1954 was warmer for the nation at 41.4°F. Between December 2016 and February 2017, the average temperature across the contiguous U.S. was 35.9°F, 3.7°F above average, the sixth warmest winter on record.
Precipitation
Precipitation may have hampered construction in parts of the West coast, but the precipitation map appears to be overall favorable as well.
So, before anyone gets too giddy over these numbers, bear in mind very unusual seasonality factors.
Builders build when the weather permits, and the weather was very cooperative this Winter.
Despite Weather, Consumer Spending is Weak
Those expecting a strong second quarter based on housing alone may be in for a rude awakening as consumers have a newfound hold on their pocketbooks.
Here are three articles to consider.
- Consumer Spending Flat, PCE Inflation Weakest Showing In 16 Years, Rate Hike Odds Rising.
- Regional Lender Loan Crash: Nearly Every Major Regional Bank Missed Lending Estimate.
- Subprime Credit Card Losses Bite Capital One: Income Down 20%, Charge-Offs Up 30%.
Link number one is from earlier today.
The second quarter is not off to a good start. However, the GDP models may go haywire once again by not factoring in weather-related phenomenon.
Mike “Mish” Shedlock
Everybody knows everything that happens is because of climate change. Don’t argue it is an established fact. Enough said.
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I live in Vancouver Washington and we’ve only had 25 days here where it did not rain since Oct 1st 2016. However there is a new development of family homes being built behind us and rain or shine they work everyday. My point being on the west coast the weather really does not slow down construction to any degree.
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I suspected as much
However, weather will impact the Midwest
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I live in NW Montana, just west of Glacier Park. We have had best snow year since 2011. We also had some cold weeks in December and January. Building and construction went right on. When the new City Hall and Parking Garage is finished, most of it will have been built during this past winter.
So I call BS on this notion that what is “normal weather” (mean +- 1SD)? is making any big difference in construction activity. If builders let cold and snow stop things, nothing would get done around here for nearly 1/2 the year!
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Might be a building repair boom coming to Skagway, Alaska…. 34 earthquakes today with 3 of them above 6.0
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The upward revision to Construction Q1 will help in Q1 GDP revisions … but raise the bar for Q2 … if Trump Reflation fades (it has / will) Construction will struggle to help Q2 GDP.
I’m in the mid Atlantic … normally in February bundled up and indoors … mid February this year eating and drinking at a brewery … on their outdoor patio … in shorts and t shirt.
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Well, looks like budget deal to avert govt shutdown … does not include any funds for The Wall … at least for FY2017.
DJT could take a stand and insist / veto … or back pedal just as he has done on other campaign promises.
Goldman Sachs parasites (and Kushner) in The Administration running the show.
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Could be some big changes in the weather awaiting. Check to see if the War Party is heavily invested in construction and housing stocks, as this could be a two-fer bet on a nuclear winter (pleasing the Liberal Interventionist climate-change crowd by easing global warming) and war with Russia (pleasing McCain, Graham & Neo-Cons). Big construction programs would be needed to rebuild a nuked out Beltway. Lots of lending business (banks benefiting from Yellen’s higher rates) for the Fed’s consortium of banks. Plus QE up the kazoo as all USA.gov spending constraints would be off for the emergency. 9-11 will seem like a “false flag” test run in comparison. Not saying for sure that Yellen is lining up all the ducks for the banks, just a hypothesis worth looking into.
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Well I notice some weather related effects on construction. When it rains it looks wet, and when it snows it tends to change to white colour. When it freezes not much goes on exept if it is sort of wet then freezes, and then you get these stalactites forming on the gutters. When its windy they look pretty solid compared to everything else blowing around, and sometimes they rattle a bit. When it floods they tend to submerge. That is almost everything I can think of for now except for nice sunny days but those just look brighter than cloudy ones.
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Oh, I forgot the spending part. Well I reckon people will spend more when it rains because they want to stay dry, and also when it is windy so they don’t get their hair messed up. When its sunny they will want somewhere for shade so that is a winner. When its cloudy that is a bit like rain with advanced warning so the early birds will be in, plus the pessimists who think it will go sunny and so need shade. Snow covered looks nice so your going to draw crowds, and stalactites will remind the cave dwelling type they need a place to stay. So really the only difficult one is submerged flooded property, so I’ll give you all a clue, and its made up of the words ‘fisher’ and ‘men’…. something for y’all to spend the evening puzzling out.
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