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The December Construction Spending Report shows continued weakness, especially in residential construction.

Total Construction

Construction spending during December 2018 was estimated at a seasonally adjusted annual rate of $1,292.7 billion, 0.6 percent below the revised November estimate of $1,300.6 billion. The December figure is 1.6 percent above the December 2017 estimate of $1,272.6 billion. The value of construction in 2018 was $1,297.7 billion, 4.1 percent above the $1,246.0 billion spent in 2017.

Unexpected Weakness

Econoday highlights the unexpected weakness.

Construction spending fell 0.6 percent in December with year-on-year growth declining to a tepid 1.6 percent, the weakest growth rate in at least 3 years.

The unexpected monthly decline (consensus forecasts called for a moderate increase of 0.3 percent) was led by private residential construction, which fell 1.4 percent in December, as a 3.2 percent drop in spending on new single family homes overshadowed a 3.1 percent rise in spending on new multi-family units. Spending on remodeling fell 0.4 percent.

Muting the overall spending drop was a 0.4 percent increase in private non-residential construction, bolstered by a 3.3 increase in health care, a 1.7 percent rise in manufacturing, and a 1.0 percent increase in lodging.

Public construction spending fell 0.6 percent in December, driven by a 7.8 percent drop in health care, a 5.1 decrease in residential spending, a 2.9 percent decline in power, and a 0.9 percent drop in spending on highway and street construction. Partly offsetting these were increases in office construction and commercial construction of 6.4 percent and 6.1 percent, respectively.

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State and local construction spending was down 0.5 percent in December, while federal construction spending fell 2.2 percent.

Year-Over-Year Comparison

Normally one uses non-seasonally-adjusted numbers for year-over-year comparisons.

Fred shows those numbers as +0.85, +4.15, and -3.71 for overall, nonresidential, and residential respectively.

Econoday notes a year-over-year overall growth rate of 1.6%.

If one use seasonally-adjusted numbers for the comparison, Fred shows those numbers to as +1.58, +3.95, and -1.53 respectively.

No Surprise

Add this to the list of recession-looking data.

Houses are not affordable and the slowdown is obvious. No one should be surprised by this.

Mike "Mish" Shedlock