Construction Spending

Importance: **

Definition: Construction spending represents about 20% of the gross domestic product, making it a very important source of information. Economists look to construction spending for clues about the
overall economy. The construction industry is one of the first to go into a recession when the
economy declines and, likewise, the first to recover as conditions improve.

Value of New Construction Chart
Related Indicators:

Source: Bureau of the Census of the U.S. Department of Commerce

Frequency: Monthly

Availability: Two months following the reported month



Volatility: High
Likely Impact of Financial Markets:

                    Interest Rates: Of little consequence to the bond market

                    Stock Prices:

                    Exchange Rates:

Ability to Affect Markets:

Analysis of the Indicator:

The data covers three important areas: private construction (residential and nonresidential) and
public construction. The residential category includes single family homes and apartments.
Nonresidential construction includes factories, offices, hotels, motels, churches, hospitals, and private
schools. Finally, the public sector covers highways, streets, military reservations, water supply
facilities, public school buildings, housing projects, and sewer systems. The construction spending
data has two problems--it is late in coming and not particularly accurate when it arrives. It is
published two months out from the reported month, making it one of the last pieces of information
reported on the state of the economy. Because of its volatility, economists typically use the three- to
six-month moving average in order to determine trends. The bond market considers this report
useless. Consequently, it has little impact on bond prices.

WEB Links

A Graph of the latest Construction Spending data from The Census Economic Briefing Room .

The latest Construction Spending report from the White House.