Commercial real estate spending is down for the 10th consecutive month. Most other sectors joined the slump in July.
The monthly Construction Spending report shows a downturn in most construction categories.
Total Construction Construction: Total spending during July 2024 was estimated at a seasonally adjusted annual rate of $2,162.7 billion, 0.3 percent (±1.0 percent) below the revised June estimate of $2,169.0 billion.
Private Construction Spending: Private construction was at a seasonally adjusted annual rate of $1,678.7 billion, 0.4 percent (±0.7 percent) below the revised June estimate of $1,685.5 billion.
Residential Construction: Residential construction was at a seasonally adjusted annual rate of $941.6 billion in July, 0.4 percent (±1.3 percent) below the revised June estimate of $945.3 billion.
Nonresidential Construction: Nonresidential construction was at a seasonally adjusted annual rate of $737.2 billion in July, 0.4 percent (±0.7 percent) below the revised June estimate of $740.2 billion.
Public Construction In July: The estimated seasonally adjusted annual rate of public construction spending was $484.0 billion, 0.1 percent (±1.8 percent) above the revised June estimate of $483.5 billion.
Construction Spending Millions of Dollars
Every key component of construction has peaked and is rolling over except for manufacturing.
The latter is due to misguided attempts by the auto industry to roll out EVs and more importantly free money from the Biden administration for autos, chip manufacturing, solar manufacturing, etc.
Spotlight Commercial
Commercial construction spending is down 10 consecutive months and 14 out of the last 15.
Commercial Construction Categories
The Census Department has a nice breakdown of Construction Spending Categories.
In general, commercial Includes buildings and structures used by the retail, wholesale and selected service industries.
Offices are part of nonresidential construction as is commercial. But offices are not part of commercial.
Here’s a spotlight on commercial construction.
- Auto: includes auto dealerships, motorcycle dealerships, auto showrooms, and truck dealerships.
- Food: includes supermarkets, bakeries, dairies, markets, convenience stores, and delicatessens.
- Dining/drinking: includes liquor stores, bars, nightclubs, cafés, diners, restaurants, cafeterias, taverns, inns (eat & drink only), and bistros.
- Fast food: includes drive-in restaurants and fast food restaurants.
- Multi-retail: includes department stores and variety stores, shopping centers, shopping plazas, and town centers.
- Other commercial: includes drug stores and pharmacies, hardware stores and lumber yards, clothing stores, jewelry stores, salesrooms (non-auto), furniture stores, office supply stores, storerooms, and electronics stores.
Commercial Construction a Driver of Job Growth
Commercial construction is only $125.1 billion compared to $952.9 billion residential, $484.0 billion public, and $2.2 trillion total.
However, once houses and roads are built, there are no further directly related jobs. Once stores are built, there are many directly related jobs.
Commercial construction is a tiny component of construction spending but a mighty contributor to future jobs once completed.
ISM Index Little Slightly Better But New Orders and Production Contracting Faster
In the manufacturing sector ISM Index Little Slightly Better But New Orders and Production Contracting Faster
The Production Index continued in contraction territory in August, registering 44.8 percent, 1.1 percentage points lower than the July reading of 45.9 percent. Of the six largest manufacturing sectors, only Computer & Electronic Products reported increased production. The index is at its lowest level since May 2020, when it registered 34.2 percent.
With new orders, new export orders, and production worsening, employment is headed nowhere.
There is little to cheer about in any economic reports. And a big international trade war is on the horizon.
For discussion, please see Faced with Stagnant Domestic Growth China Starts a New Global Trade War
Excellent work! Well documented! You should be proud.
Thanks
“Commercial” of all types seems to be heavily overbuilt here with lots of empty space and “available” signs up in all the strip malls and “multi-use” developments. There have been no new malls built since early 2000’s but those are no surprise at being half empty.
Office space isn’t quite as heavily overbuilt but there is lots of open “space” if you look. Might not be the “perfect fit” or best location but it’s there.
I’m not going to predict but I can see a few foreclosures and bankrupt property “managers” on the horizon.
Going to be interesting to see how the refinancing goes on the upcoming loan renewals.
We are buying tranquility that keep us numb. But one day, without a warning : from tranquility to volatility.
I smell a whiff of summer of 2007.
In 2020 the US, Europe and China economies were shut down. Can it happen again. And again. To stimulate its economy China is building serial overcapacities in sectors that consumers want and don’t. The gov ordered producers to cut export prices to survive. Sectors that are important to our national interest will be protected by tariffs. Consumers will benefit from lower Chinese goods that are not protected. Bad is bad. Bad items don’t sell at any price. Weimar II produce plenty bad. Exporting deflation causes a spiral inflation internally. The Dow and King dollar will salivate.
Highly skilled workers in Europe and the US protected by tariffs and low end workers alike will benefit the global tranquility. Until the pacified Weimar II unleash a surprise attack to easy the People of China suffering. Are we ready. What will WE do : appeasement first.
Fortunately for Harris the economy’s bough will not break before the election.
Build that wall. Car dealers crystal palaces are waiting for customers. On Labor Day the malls cont to decay. Our national factories completions will take a few more years. Drilling in the Gulf of Mexico cause climate change. [1M] SPY #13 must be above July. Tomorrow will be better than today.
There is a 3 Body Problem here: 1) Fiscal policy is a $2 trillion deficit, 2) Monetary policy is to buy the debt, and 3) the currency has to weaken. Either interest rates responds, or inflation responds. Only the Bond Vigilantes can right the ship.
yep inflate out of debt based on 2.5% to 3% annual inflation
or could hold federal spending increases to just below the annual inflation rate and raise taxes slightly to reduce the deficits and debt to GDP ratio
If you do the math, it doesn’t work.
The cost of the debt (Interest rate) MUST be
interest rate = inflation + real growth + risk premium.
You can only get there by
1) slashing Federal spending (and keep growth below inflation and real economic growth) while maintaining effectiveness.
At present, Govt is the pig at the trough, producing very little compared to the food it consumes.
2) A structured plan to repay the current debt over time (say 30 years).
That is NO NEW DEBT, including unnecessary wars etc
Not to worry, not to worry. Gavin Newsom is ready to hand out 150k to every illegal that wants a home. Of course, I’m not sure what kind of home they’re getting in CA with 150k, but perhaps it’ll be close enough to the Tenderloin so emergency services can get there in time to administer Narcan.
Yet real estate shorts get clobbered because declining rates are interpreted as bullish for construction.
Mortgage rates are still in the 6’s. Unless they drop a lot more, a new home will stay out of reach for a lot of people.
Isn’t that the catch-22, though? if the central bank lowers interest rates, then we will see a return of high inflation. that will crush consumers once again. if the Fed doesn’t lower interest rates, then business sectors & real estate will howl, not to mention the higher interest costs for the federal government.