CONTINUED GAINS, WILL ADD TO Q4GDP

Construction Spending Tuesday January 3, 2012

3 2 1 Monthly % Change 0 -1 -2 -3 -4 -5 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11
Monthly % Change Year-on-Year % Change

12 8 4 Yearly % Change 0 -4 -8 -12 -16 -20

Construction spending rose 1.2% in November following a downwardly revised decline of 0.2% in October. Spending in September was revised substantially higher. Construction spending is now 0.5% above its year ago level, after declining on an annual basis for the last 48 months. Moreover, annual gains have accelerated in the past few months. Residential construction spending rose 2.0% in October and is now 3.4% higher than its year ago level. Even with these gains, residential investment has been basically flat for the past two years and is just above its cyclical nadir of July 2009. A rebound will be dependent on reduction of the current large inventory of existing homes, particularly REOs and other foreclosures. Nonresidential construction spending was unchanged in November amid mixed industry performance. Nonresidential construction spending is up 4.5% over the last year, and has grown at a much faster pace in the last six months. Public construction expenditures rose 1.7% in November but remain 5.3% lower on the year. Despite the monthly gain, the major weak spot in construction spending continues to be the public sector. Fading stimulus dollars and difficult budget positions for many state and local governments significantly downgrade the outlook for public spending going forward. Of the other two categories of spending in the private sector, residential construction spending has stabilized at a weak level while non-residential investment remains volatile. Recent gains suggest that construction spending will contribute positively to Q4 economic growth and if sustained, signal that better times may be ahead for construction activity.
Forecast: Consensus**: Actual: 0.5% 0.5% 1.2% Monthly % Change Relative Weight* Nov-11 100.0% 1.2 Oct-11 -0.2 0.8 0.7 2.3 -0.6 -1.3 4.0 1.5 -3.9 -3.5 -1.8 -1.6 0.4 -3.4 Sep-11 1.1 0.2 1.5 1.5 1.5 -1.9 2.8 0.3 2.1 1.9 0.4 0.9 3.0 -1.4 PERCENT CHANGE Annual Rates of % Change for Three Six Twelve Five Month Month Month 2010 2009 Year 8.8 5.1 0.5 -6.0 -16.2 -8

Ten Year -0.4

Construction Spending Previous estimate Private Construction Residential Nonresidential Commercial Power Office Health Care All Other Public Construction Education Highways & Streets All Others

64.7% 30.2% 34.5% 5.0% 10.8% 2.8% 3.6% 12.2% 35.3% 8.9% 10.3% 16.1%

1.0 2.0 0.0 -0.8 3.0 -1.3 0.4 -1.9 1.7 0.5 1.9 2.3

13.4 26.2 3.5 -14.9 47.2 1.9 -5.9 -13.5 0.9 -1.0 23.5 -9.9

5.3 -4.2 14.9 4.5 36.9 1.3 4.2 9.6 4.6 6.9 22.7 -6.0

4.0 3.4 4.5 12.0 8.4 2.3 -4.9 2.0 -5.3 2.8 -2.2 -10.9

-8.1 -6.3 -9.7 -14.3 11.1 -19.4 -1.8 -20.1 -2.1 -10.6 5.1 -1.5

-21.9 -15.0 -27.0 -40.6 -5.2 -43.5 -21.9 -27.1 -3.7 -10.3 -3.0 -0.2

-12.2 -19.1 -1.0 -13.2 19.4 -9.7 0.7 -1.6 4.0 -0.5 4.5 6.3

-2.4 -4.0 -0.8 -5.7 10.6 -8.9 4.2 -1.8 4.7 #N/A #N/A #N/A

Source: Bureau of the Census, Department of Commerce via Haver Analytics. Data, graph & table courtesy of Insight Economics, LLC. **Bloomberg 2011 HousingMatrix, Inc. | http://www.HousingMatrix.com | All rights reserved. Reproduction and/or redistribution are expressly prohibited. Hot Sheet is a registered trademark of HousingMatrix, Inc. Information herein is based on sources we believe to be reliable, but its accuracy is not guaranteed.