The U.S. Census Bureau of the Department of Commerce recently announced that construction spending during November 2008 was estimated at a seasonally adjusted annual rate of $1,078.4 billion, 0.6% (±1.6%) below the revised October estimate of $1,085.3 billion. The November figure is 3.3% (±2.2%) below the November 2007 estimate of $1,115.3 billion.

During the first 11 months of this year, construction spending amounted to $998.4 billion, 5.3% (±1.3%) below the $1,054.3 billion for the same period in 2007.

First, let’s look at private construction:

Spending on private construction was at a seasonally adjusted annual rate of $756.4 billion, 1.5% (±1.1%) below the revised October estimate of $767.7 billion. Residential construction was at a seasonally adjusted annual rate of $328.3 billion in November, 4.2% (±1.3%) below the revised October estimate of $342.6 billion.

Nonresidential construction was at a seasonally adjusted annual rate of $428.2 billion in November, 0.7% (±1.1%) above the revised October estimate of $425.1 billion.

And now for public construction:

In November, the estimated seasonally adjusted annual rate of public construction spending was $322.0 billion, 1.4% (±2.6%) above the revised October estimate of $317.6 billion. A bright spot in the construction industry in 2008, educational construction was at a seasonally adjusted annual rate of $88.7 billion, 1.3% (±2.7%) above the revised October estimate of $87.6 billion.

The November numbers surprised some economists who thought nonresidential construction would have taken a significant hit by that point. But the value of put in place construction increased in November over October, and what’s more, it increased 16% over the first 11 months of 2008 compared to the same period in 2007. As the below graph shows, as of November, data representing the nonresidential construction market has yet to peak for either the private or public components. This is likely because there were so many projects underway at the beginning of 2008.

However, there are signs of underlying weakness, such as a decline in retail construction that is not surprising considering the weakness in retail sales over the past few months, and nonresidential construction is being forecasted down in 2009 because of weakness in the overall economy (deep recession, actually). I’ll have more on 2009 soon. But in the meantime, expect 2008 to close at more than $1 trillion in total construction spending.

Craig DiLouie

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