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Construction Spending: Not Good News At All

May 11, 2009

By Bill Conerly, Businomics, Conerly Consulting LLC

I tried to get excited about the latest news, focusing on non-residential construction.  (No hope any time soon for residential activity.)  Here’s the private non-res data:

We’ve got a couple of months of gains there; grounds for happy talk, right?   I poked around the detail and found one sub-sector driving the recent increases:  manufacturing.  Huh?  Manufacturing has been pretty hard hit by the recession, so I look at the history (courtesy of www.Economagic.com):

The data suggest that either 1) construction of new factories is totally impervious to the recession, or 2) the time lags are so long that we have not yet seen the downturn, but it’s coming.  Guess which hypothesis makes more sense to me?

Conclusion: look for manufacturing construction to start a slide soon, and for that slide to last a couple of years at least.

— Bill Conerly is principal of Conerly Consulting LLC, chief economist of abcInvesting.com, and was previously Senior Vice President at First Interstate Bank. Bill Conerly writes up-to-date comments on the economy on his blog called “Businomics” and produces a monthly audio magazine available on CD. Conerly is author of “Businomics™: From the Headlines to Your Bottom Line: How to Profit in Any Economic Cycle”, which connects the dots between the economic news and business decisions.

  
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Discuss this article

John May 11, 2009

I’m inclined to agree that since many of these projects are planned out so far ahead, that it’s just a matter of time before it gets hit.

Ben May 11, 2009

Give us time, it will rebound soon.

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