April 1, 2020

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Construction spending (the green bars above) fell 1.3% in February after a substantial 2.8% increase in January.  Over the past year it has climbed 6.0%.  Not only is this a very volatile series with large swings from month to month, even the previously released data can revise substantially.  But none of this matters much.  Construction is going to fall in the months ahead as economic activity has come to a standstill following th imposition of super restrictive measures to halt the spread of the corona virus.  For what it is worth, we now anticipate a 20% decline in second quarter GDP.  But we also believe that those measures used to halt the spread of the virus will show early signs of success by mid-April and more clear-cut evidence that they are working by the end of April.  That should bolster both consumer and business confidene, trigger a sharp rebound in stock prices, and get the economy headed back in the right direction.  We expect Q3 GDP growth of 8.7% and fourth quarter growth of 7.0%.

Private construction fell 1.2% in February after having risen 2.5% in January.   Over the past year private construction spending has climbed 5.0%.

Within the private construction spending category, residential spending declined 0.6% after having risen 3.8% in January.  Over the course of the past year private residential construction has climbed 11.4%.

Private nonresidential construction declined 2.0% in February after having risen 1.0% in January..  During the past 12 months nonresidential construction has fallen 0.7%.

Public sector construction declined 1.5% in February after having risen 3.5% in January ..  This category can be quite volatile on a month-to-month basis, but in  the past year such spending has risen 7.4%.

Stephen Slifer

NumberNomics

Charleston, SC