MINOR GAIN LED BY RESIDENTIAL SPENDING

Construction Spending Tuesday November 1, 2011

3 2 1 Monthly % Change 0 -1 -2 -3 -4 -5 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11
Monthly % Change Year-on-Year % Change

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

Construction spending rose 0.2% in September after a solid gain of 1.6% in August. Spending in July was revised sharply lower. Nevertheless, this was the fifth increase in the last six months for a net gain of 3.2%. Construction spending is now 1.3% below its year ago level and down 35.1% from its March 2006 peak. Residential construction spending gained 0.9% in September and is just 0.1% higher than a year ago. The trend in residential investment has been basically flat for the past two years near 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 gained 0.3% in September led by a 3.5% gain in health care facilities. Nonresidential construction spending is up 7.4% over the last year, and has been trending much higher than that in the last several months. Public construction expenditures declined 0.6% in September and are9.2 lower on the year. A 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. Even with recent gains, private construction spending has yet to mount a significant recovery.
Forecast: Consensus**: Actual: 0.5% 0.3% 0.2% Monthly % Change Relative Weight* Sep-11 100.0% 0.2 Aug-11 1.6 1.4 0.6 0.4 0.8 -3.2 4.5 -0.3 -2.5 0.8 3.5 5.2 4.3 2.1 Jul-11 -3.3 -1.4 -3.9 -7.7 -0.5 1.3 0.5 -1.6 0.3 -1.8 -2.2 -1.3 -0.5 -3.7 PERCENT CHANGE Annual Rates of % Change for Three Six Twelve Five Month Month Month 2010 2009 Year -6.0 6.6 -1.3 -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

63.7% 29.0% 34.7% 5.1% 10.1% 2.9% 3.9% 12.7% 36.3% 9.3% 10.2% 16.7%

0.6 0.9 0.3 -1.6 -0.6 -0.8 3.5 1.0 -0.6 -0.9 1.4 -1.6

-10.4 -23.3 2.4 -13.1 18.7 -10.2 5.1 -0.1 2.4 12.0 22.5 -12.2

10.6 0.9 19.8 19.7 28.9 10.2 13.4 17.5 0.0 6.5 7.7 -7.5

3.9 0.1 7.4 9.5 25.7 -4.0 -2.6 0.8 -9.2 -5.2 -6.3 -12.9

-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.