BROADBASED PRIVATE SECTOR GAINS

Construction Spending Thursday November 1, 2011

3 2 1 Monthly % Change 0 -1 -2 -3 -4 -5 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11
Monthly % Change Year-on-Year % Change

12 8 4 Yearly % Change 0 -4 -8 -12 -16 -20

Construction spending rose 0.8% in October following a 0.2% gain in September. Strong spending in August was revised even higher. This was the sixth increase in the last seven months for a net gain of 4.7%. Construction spending is now just 0.4% below its year ago level and down 34.2% from its March 2006 peak. Construction spending has declined on an annual basis for 48th straight month; however the rate of decline has slowed substantially. Residential construction spending rose 3.4% in October and is now 1.7% higher than its year ago level. Even with these gains, residential investment has been basically flat for the past two years near its cyclical nadir of July 2009. A rebound will be dependent on reduction of the current large inventory of existing homes, particularly REOs and other foreclosures. Nonresidential construction spending gained 1.3% in October amid mixed industry performance. Nonresidential construction spending is up 8.4% over the last year, and has been trending higher than that in the last several months. Public construction expenditures fell 1.8% in October and are now 9.4% lower on the year. A major weak spot in construction spending continues to be the public sector. Fading stimulus dollars and difficult budget positions for many state and local governments significantly downgrade the outlook for public spending going forward. Of the other two categories of spending in the private sector, residential construction spending has stabilized at a weak level while non-residential investment remains volatile. Even with recent gains, private construction spending has yet to mount a significant recovery.
Forecast: Consensus**: Actual: 0.5% 0.3% 0.8% Monthly % Change Relative Weight* Oct-11 100.0% 0.8 Sep-11 0.2 0.2 0.2 0.6 -0.1 -4.4 0.7 1.3 1.8 0.2 0.3 2.1 2.4 -1.9 Aug-11 2.2 1.6 2.0 2.1 2.0 -0.5 4.0 -1.8 -2.6 4.0 2.5 2.5 3.5 1.9 PERCENT CHANGE Annual Rates of % Change for Three Six Twelve Five Month Month Month 2010 2009 Year 13.7 8.0 -0.4 -6.0 -16.2 -8

Ten Year -0.4

Construction Spending Previous estimate Private Construction Residential Nonresidential Commercial Power Office Health Care All Other Public Construction Education Highways & Streets All Others

64.9% 29.9% 35.0% 5.1% 10.6% 3.0% 3.7% 12.7% 35.1% 9.0% 10.0% 16.0%

2.3 3.4 1.3 0.4 5.8 3.0 -1.9 -1.2 -1.8 -1.8 -0.4 -2.6

19.6 26.7 13.9 -17.1 50.9 10.3 -10.7 12.3 3.8 11.4 23.8 -10.3

12.7 0.6 25.0 14.2 49.7 22.7 6.0 18.6 0.1 6.6 14.8 -10.8

5.2 1.7 8.4 11.9 18.2 0.7 -3.3 5.4 -9.4 0.6 -8.3 -14.9

-8.1 -6.3 -9.7 -14.3 11.1 -19.4 -1.8 -20.1 -2.1 -10.6 5.1 -1.5

-21.9 -15.0 -27.0 -40.6 -5.2 -43.5 -21.9 -27.1 -3.7 -10.3 -3.0 -0.2

-12.2 -19.1 -1.0 -13.2 19.4 -9.7 0.7 -1.6 4.0 -0.5 4.5 6.3

-2.4 -4.0 -0.8 -5.7 10.6 -8.9 4.2 -1.8 4.7 #N/A #N/A #N/A

Source: Bureau of the Census, Department of Commerce via Haver Analytics. Data, graph & table courtesy of Insight Economics, LLC. **Bloomberg 2011 HousingMatrix, Inc. | http://www.HousingMatrix.com | All rights reserved. Reproduction and/or redistribution are expressly prohibited. Hot Sheet is a registered trademark of HousingMatrix, Inc. Information herein is based on sources we believe to be reliable, but its accuracy is not guaranteed.