Carney: Real Construction Spending is Falling in Age of Bidenflation

Residential construction, which has obviously been much stronger over the past year, rose 0.9 percent in November and is up 16 percent over the past year. But when we offset that against materials costs, real construction activity appears to be down by around 16 percent.

Spending on public construction projects fell 0.2 percent in November and is down 0.9 percent over the past 12 months, perhaps somewhat surprising given the huge amount of deficit spending we saw last year. The infrastructure bill passed last year might turn this around in 2022.

The pandemic is still weighing on non-residential construction, which was flat last month and is up just 3.4 percent in non-inflation adjusted terms over the past year. Office construction is down 32.1 percent over the past 12 months. Hotel and motel construction is down 30.7 percent.  If you adjust these for the change in construction materials cost, you get eye-popping declines of over 60 percent.

One hopeful economic sign is the construction projects for the commercial sector, one of the largest categories of nonresidential building, is up by 15.1 percent after dropping sharply last year. This category tends to lag downturns in the economy, likely because commercial construction contracts compel spending even after the economy makes a turn for the worse.

The delta variant, however, appears to have stalled the recovery in commercial construction. Starting in September, the growth line goes flat. November saw a 0.1 percent decline compared with October.