The Econoday consensus expected a bounce in May construction spending but the only bounce was an April revision from -1.4% to -0.7%. May was flat vs an expected bounce of 0.5%.
Spring 2017 was not the greatest for the nation’s housing sector where data have been mixed at best. Permits have been down and spending data are flat to down with construction spending unchanged in May which hits the very lowest estimate in Econoday’s consensus range.
And the weakness is in residential spending, down 0.6 percent overall and including declines for single-family homes, residential improvements, and especially in May for multi-family units.
Private nonresidential spending fell 0.7 percent, with declines in transportation, manufacturing, and commercial. An offset is public nonresidential, up sharply after 2 prior months of declines with the gain centered in education, up 5.1 percent, as roads fell 0.9 percent for a second straight dip.
Public spending in May aside, the slowing in construction spending is not a positive signal for the housing sector nor for second-quarter GDP. The housing sector moved higher at the beginning of the year but has stumbled since.
- Total Private: -0.6%
- Residential: -0.6%
- Single-Family: -0.3%
- Multi-Family: -3.3%
- Nonresidential: -0.7%
- Commercial: -1.0%
Revisions go all the way bak to May of 2016. Previous revisions have gone back decades.
It was construction spending revisions that caused the GDPNow model to blast into the stratosphere with an initial estimate of 4.3% for first quarter.
Those revisions are all baked into first-quarter GDP estimates, for which we have seen the final numbers.
March construction spending was $1,239,654. April and May are down a net 0.76%. Construction spending is a heavy favorite to subtract from second quarter GDP.
Mike “Mish” Shedlock
Medex Man said:
After struggling to pay Obamacare premiums and not having enough money afterward to cover the massive deductible — now consumers are supposed to have money left over to buy a 20K sq ft McMansion with shiny new Viking appliances (and a butler to constantly polish said appliances, butler sold separately), and a 5 car garage?
110% of “discretionary income” has been pre-allocated by Washington DC to pay Obamacare premiums. There is nothing left after that.
Next year, your paycheck will increase 2-3%, Obamacare premiums will increase another 30% — leaving consumers with 27% less money to splurge with.
This can only continue another year or two before workers are going to blow a gasket on Congress and tear Paul Ryan’s naughty bits off. The media can whine about welfare cases all they want, but when actual workers/taxpayers can’t afford health CARE (insurance is not care) — the system collapses.
Obamacare is going to get repealed, because the survival of the whole economic system depends on it. Don’t know when Congress will wrap their tiny little minds around this inevitability, but until they do the economy will struggle just to tread water.
Add in all the tax increases at the state and local level and you have an economic disaster. Apparently politicians think the cure for high taxes is higher taxes.
“Next year, your paycheck will increase 2-3%, Obamacare premiums will increase another 30% — leaving consumers with 27% less money to splurge with.”
Huh, is that’s how math works?
For a dude always makin’ fun of Ivy grads I would have expected ya’ to recognize the product of the formula is non-linear as a function of income and to a much lesser (yet nonetheless variable) extent – current premiums.
Medex Man said:
I am not the one trying to convince people an economy growing 3% per year (or less) can fund spending that grows 30% per year. I don’t expect your level of intellect to grasp compounding.
You are so lost in the details of what portion of spending the 30% applies to that you miss the bigger picture. 30% compounded annually is MUCH greater than 3% compounded annually.
Just try to work on that before getting bogged down in your academic minutia.
I would never try to convince anyone of such. I understood what you were trying to say. You just sucked monkey dick at saying it.
The fact that American health care didn’t make the top 16 list this year (again) shows that America needs a different approach.
Stuki Moi said:
All that really “shows,” is that there are enough suckers born, and/or indoctrinated, every minute, that making up random “rankings” of things noone knows how to “rank”, has a willing audience.
America does need a different approach, for sure. But arbitrary “rankings” by a bunch of halfwits, has got exactly nothing to do with it.
I had to use Obamacare health insurance and I paid (of cause based on income levels) almost nothing: $110 monthly premium when Cobra was $1,200+ — wow. Obamacare is just great. Based on my experience I strongly support SINGLE PAYER – throw all insured people into one big pot and at the same time limit the profits of the pharma/health care industry – like the Europeans do it.
Medex Man said:
the free sh!t army speaks…
unfortunately, you just take and take — you don’t pay anything into the system that you take so much out of.
And since you missed the blizzard of memos from Brussels while you were standing in line at the welfare office: Europe is bankrupt
You paid nothing because the REST of us paid out our ass for it! Try $1100/mth for a family of 3, with a $6500 deductible…welcome to buying health insurance in California.
Lots of expensive pickup trucks are going back to the dealer.
Bone Fish said:
I have noticed a sharp increase in one or two year old, ¾ & 1 ton ‘limo work trucks’ for resale on dealer lots past couple of months.
I would not bet on the ability of the congress and senate to repeal O’care. They have shown little resolve to do anything positive for the average tax payer. If trump wanted to get them to repeal it all he would have to do is put them in the O’care. It would not last a week.
Jon Sellers said:
It’s a difficult situation. What happens if you repeal Obamacare and prices go through the roof anyway? Only now you find out that whatever sickness you have is no longer covered? That’s just going back to the pre-Obamacare days.
I think it is incredibly important that you find a way to blame that situation on liberals. You can’t just let people blame it on the lack of regulatory governance of medical pricing and contract schemes, otherwise the population turns against the medical community itself and demands action from the government AGAINST the medical community.
And with the medical community providing the bulwark of campaign funding, your just handing the government over to progressives. The population must be convinced that there is no alternative to ever growing prices and that this is the liberal’s fault. Until we figure out how to tell a convincing story there, I don’t see how you can just repeal Obamacare.
Medex Man said:
Its cliche that whenever you see a boiler-room brokerage movie, Hollywood always depicts at least one “mark” (sucker?) as a doctor. Doctors (until recently) made lots of money, lots of distractions, and NO BUSINESS SENSE AT ALL.
An economy growing 3% per year compounded simply will not support spending that grows 30% per year compounded. The effects of compounding are relentless, and will overpower every lobbyist alive or dead.
Doctors take the Hippocratic oath — but they really should take basic courses in accounting and business. What they ask for is not possible, so its not going to happen.
In countries (like UK) that relied on external subsidies (often from oil royalties), the NHS is breaking down. Costs are spiraling just as boomers start to retire and oil royalties start to plateau.
Your home state of left wing crazies just admitted that their $400 billion “universal” health fantasy isn’t possible — the costs already exceed all state revenue.
Socialist fantasies of never ending spending sprees are colliding with reality all over the G7 — Europe, Japan, and yep even in the biggest economy on Earth (for now).
Socialism invariably runs out of other people’s money and then fails
Medex Man said:
@Jon Sellers asked “What happens if you repeal Obamacare and prices go through the roof anyway?”
You forgot to ask: what happens if Congress doesn’t repeal Obamacare and the costs get so high that hospital systems collapse, businesses shut down (and stop employing people / paying taxes), and black markets start springing up everywhere? What happens when the rich have concierge doctors, Congress has concierge doctors — and everyone else is forced to pay Obamacare without getting anything in return?
I don’t believe Congress, under either party, has the skill sets needed to control health care COSTS. Insurance overlays are just smoke and mirrors — its the underlying cost structure that matters. The people who pay billions for military planes, the people who made dozens of 5yr plans to fix the post office and/or Amtrak, the people who have cost over-runs on EVERYTHING… these are not the sorts of people who can implement cost controls. Elect dems or reps — they can’t (are not able to) control costs.
You can waste time re-arranging deck chairs on the Titanic, but unless healthcare COSTS are brought under control, you are wasting everyone’s time arguing about insurance schemes. And when it comes to controlling costs (on any subject), that is simply not a capability of government.
With peaking / flat subsidies (oil royalties) — the UK and Canadian systems are starting to implode also (actually they started having cost problems before Obama scammed America). Both those systems face retiring baby boomers leading to increased demand for health care, while they also face global oil usage that appears to have peaked meaning flat to declining subsidies. The NHS is a socialist system, and like every other form of socialism it is running out of other people’s money.
The Canadian and UK health care systems are not imploding. Stop with the lies Medex. Both systems provide excellent care and better outcomes than the US system at a fraction of the cost. While the US system costs over 17% of GDP, the Canadian system costs less than 11% of GDP while the UK systems costs less than 10% of GDP.
It is America’s health care system that is imploding. And the crazy part is that you are cheering while it is happening.
Sure it does…and you will wait 6 months to get knee surgery and we might get around to your cancer screening next year. Now if you have supplemental PRIVATE insurance then you can get these services done in a timely manner like happens here in the states. I have many clients from both countries and all of them state that if you do not have supplemental PRIVATE insurance you are pretty much f’ed.
Medex Man said:
As @Eric describes, both the UK and Canadian systems are imploding. In both countries, the rich have concierge doctors and/or private insurance to make up the substantial gaps in the fraudulent “not universal” insurance.
It says a lot about the naivety of “UNrealist” that he believes the Queen of England sits in the waiting room at NHS like a commoner. I know at least two dozen wealthy British citizens (none are royalty) — and every single one of them has a concierge doctor outside of NHS. Every single one.
There was a front page news story a few years ago in which Canada’s Minister of Health traveled to the US to get surgery. The friggin Minister of Health felt he would be better served to use private insurance to get care in the USA, rather than subject himself to Canada’s system. The story was even covered by the liberal paper of record, the NY Times. Canada’s government health system wasn’t good enough for their own minister of health.
Anyone who lives in a large US city (not Detroit) that is near the Canadian border sees first hand all the wealthy Canadians crossing the border for health care. For bigger planned procedures, many now travel to Thailand, Singapore or India — paid in cash or private insurance. The wealthy do not trust their lives to Canada’s health system.
Medex Man said:
Trump is strange guy and clearly works very different to what Washington DC is familiar with.
But starting to wonder if he set Paul Ryan and Mitch McConnel up to fail — knowing that the deadline to avoid economic collapse just gets closer and closer.
They will repeal it. Left wing extremists will go nuts, but if they threaten to stop collecting welfare, no one besides them will care. On the other hand, if workers / taxpayers stop working / paying taxes — that is already causing problems for Congress.
Obamacare pushed 30% premium increases, year after year even before the bulk of baby boomers retire (which will increase demand and reduce revenue). Meanwhile the economy is growing maybe 3% per year (less in recent years).
Anyone who understands the effects of compounding knows that it doesn’t matter what Congress wants to do. It doesn’t matter whether Bernie’s little socialists demand free sh!t. The effects of compounding are relentless.
Health costs must be brought down first, otherwise they are just debating how fast the country will descend into bankruptcy and civil war.
Obamacare will get repealed like Congress’s cushy lifestyle depends on doing so… because it does.
Trump, from his real estate development days, is a lot more familiar with wearing bureaucrats down than he is with legislative horse trading (which Pelosi proved doesn’t work for 99.9% of the population anyway).
WOW – there is still a believer in Donald the twitter president.
Good luck and good night!
Tony Bennett said:
New vehicle channel stuffing got a bit stuffier.
Ford went from 72 days to 79 days end of month
GM went from 101 days to 105 days end of month
Joseph Constable said:
Interestingly there are pockets of massive construction spending. Silicon Valley including mid-peninsula which is San Mateo county, is building thousands of apartment units. Reno is being flooded by people leaving the SF Bay Area and single family home construction is massive. Lennar has 22 projects going in Reno/Sparks and Carson City. The units are sold almost immediately upon being released before actual construction begins. In lower priced projects houses go for $355,000 to $405,000. For highest priced projects the same floor plans go for $375,000 to $475,000. All the sales people at each project say prices will be inching up with every new release.
By the way, these new houses in the Reno area are all earth colors, built out to almost the edge of the property, with tiny tiny back yards. 2 to 3 car garages. Some projects are almost like the walled tracks popularized in Southern California. The Lennar houses are very high quality with super insulation so they are quiet and comfortable with modern HVAC.
I would hate to see construction spending actually start to roll over on the FRED charts. In the past recession have followed such an event.
Medex Man said:
I find it interesting that the alleged “environmentally aware” people live in places with massive homes cooled by central a/c… the massive homes mean every tree gets cut down. No water retention by the trees, no shade, no tree root structure / increased soil erosion… these people get all self righteous about the environment, but they don’t practice what they preach.
Stuki Moi said:
He said “super insulation.” (I’m pretty sure that’s a matter of opinion…. Absent at least a Passivehaus certification, $200/sq ft still smells too much like rent seeking by the usual suspects, although not even on the same order of magnitude as in Cali.)
But anyway, if Reno/Sparks gains sufficient numbers of Valley refugees, Cali governments will be under pressure to be at least a little less extractive. That’s one more development to thank Elon for helping kick off 🙂
The problem with the figures above is that they are aggregates. When one lumps data into broad general categories the data tends to lose its relevance. In parts of Texas one can find residential construction up, private commercial spending (apartments, strip malls, corporate facilities, etc are all up due to the influx of population from other states. Also there is some public construction in the state. One can see the new car market and used car market is a bit stronger in general in Texas, again, due to the increase in population. there has been an increase in employment as well. I do believe there are several states where the aggregate numbers do not reflect the economic activity. But there are those states where the economic activity has dropped more than significantly and thus skew the data. This is why I do not trust general economic data and the attempts to draw conclusions about the economy as a whole.
The north side of Chicago is booming right now, with lots of condos and apartment buildings being put up as more parts of the city gentrify. It reminds me of what was going on in 2007, which ended badly for a lot of developers.
Must be people who don’t pay taxes or use public services.
Construction is booming in some areas of the US. It would be booming in other areas if the construction companies could find enough skilled labour, but they can’t. And of course some areas are simply slow. It’s always inconsistent like this.
These slower than expected numbers will help keep a lid on GDP growth in the US to around 1%. Expect that 1% GDP print for the rest of Trumps term. But don’t worry, the rest of the world is growing nicely, and will help prevent a recession in the US.
I was very impressed with the growth in China recently. I bet I saw more than 500 cranes working on skyscrapers in every major city I visited. They are building several major bridges per year in these cities and expanding their roadways in ways that have to be seen to be believed (elevated highways towering over 8 story buildings with multiple highways at various levels below!). They will be expanding their high speed train systems from the current 19000 km to over 35000 km in the next five years. China is kind of like the US 50 years ago.
The US is a more mature economy now. Expect slow growth.
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With 250 Aetna execs moving to its new HQ in NYC certainly the housing market would have rebounded.