10/6/16

A common headline we see when Census releases monthly figures for Total Construction Spending is “Spending Unexpectedly Declines Mo/Mo.”  Here’s why that is almost always misleading. Construction spending gets revised, UP, usually. So, the first number released is generally low.

U S Census report for August Construction Spending released October 3 posts August at a seasonally adjusted annual rate (SAAR) of spending at $1.142 billion, down 0.7% from July and this reduces the year-to-date (YTD) spending from +5.6% last month to now only +4.9% higher than the same 8 months of 2015.

• Construction Spending for Nonresidential Buildings Aug vs July UP 0.4%, 6th monthly increase this year. YTD is UP 8.2% from 2015.
• Construction Spending for Nonbuilding Infrastructure Aug vs July DOWN 2.2%, 5th monthly decline this year. YTD is DOWN 0.4%.
• Construction Spending for Residential Aug vs July DOWN 0.2%, Only 2nd monthly decline this year. YTD is UP 6.2%.

Comparisons using the first print of data almost always reflect a lower mo/mo or yr/yr growth rate than the final actual result because the first print “unadjusted value” is being compared to previous month or last year “adjusted values.” Construction spending, from 1st release to last revision of data, has been revised upward every month since August 2013. That would indicate the first reports of an “unexpected decline” almost always get revised up in following months.

The latest spending release is pending revision for the next two months and then the whole year gets one (usually final) revision in the middle of next year. Sometimes there is a second annual revision the following year.

Total construction spending, from 1st release to last revision of data, has been revised upward in the last 32 months by an average of +2.3%/month. However, the average revisions for the last 12 months have averaged only +1.3%/month. Sometimes the 1st revision is down then the 2nd up. Downward revision is rare. The very strong historical trend is for upward revisions after the first release of monthly data.

Some examples of revisions:

• Total construction spending over the last 12 months has been revised UP 10 of 12 times. The average of all revisions is +1.3%/month. Monthly revisions have ranged from -0.5% up to +3.4%.
• Office spending has been revised UP 4 of 7 times in 2016. The average revision is nearly flat but revisions have ranged from -3% to +6.5%.
• Commercial spending has been revised UP 4 of 7 times in 2016. The average revision is +1.1%/month. Revisions have ranged from -1.5% up to as high as +8% for a particular month.
• Residential spending has been revised UP 6 of 7 mo in 2016. The average revision is 2.1%/month. Monthly revisions have ranged from -1.6% to +7.5%
• Power Infrastructure has been revised UP 6 of 7 times in 2016. The average revision is +4.7%/month. Revisions have been as high as 9% for a particular month.

For 2016, final data won’t be published until July 2017, but so far through July, monthly revisions have reversed 4 out of 5 initial mo/mo declines to increases.

For all of 2013, 2014 and 2015, the average month/month growth rates increased from an initial reading of +0.14% to a final reading of +0.76%.

For all of 2014 and 2015, the average year/year growth rates increased from an initial reading of +8.1% to a final reading of +10.8%.