CONSTRUCTION SPENDING DECLINES 4th STRAIGHT MONTH [View All]

[unlawflcombatnt]

Construction spending has declined for the 4th month in a row. June construction spending declined 0.3%, following a downwardly revised 1.7 percent decline in May. (May's decline was previously understated at -0.9%) This follows a decline of 1.0% April and a 0.2% decline in March. The total decline in construction over the last 4 months is 3.2%. This information can be found at:
http://www.briefing.com/Silver/Calendars/EconomicReleases/const.htm


The above graph shows the decline of total construction spending over the last 4 months.

Home construction declined even more that than total construction. June's decline of 0.4% follows declines of 3.4% in May, 2.0% in April, and 1.0% in March. Home construction has declined a whopping 6.8% over the last 4 months. This is especially concerning given that home construction is 16-25% of our economy. One source states that housing related jobs have accounted for 43% of our recent job growth. This link can be found at:
http://www.pulsejournal.com/business/content/shared/news/nation/stories/06/05_HOUSING_BUBBLE.html

This decline in construction implies that home builders are anticipating a decline in future new home demand and prices. This seems reasonable, considering new home prices dropped 5.5% in June to $214,800. And this followed May's decline from April's $232,000. That makes a total new home price decline of 7.7% in the last 2 months. Over the last year, new home prices have declined 0.4%. Thus a decline in home construction is completely consistent with the laws of supply and demand, in that price declines cause declines in production of supply. In spite of the media hype to the contrary, the home construction industry is anticipating further price declines.

It is clear that our economy is not "strong, and getting stronger." It also appears the "housing bubble" is starting to deflate. Ignoring this will make the deflation much worse. It's time to face some obvious realities. Increased corporate profits alone do not define economic "growth." Wage growth must increase as well. And it has not. And we are about to see the results.

unlawflcombatnt