By Kenneth D. Simonson
January's value of construction put in place jumped to a record seasonally adjusted annual rate of $878 billion, the Census Bureau reported today www.census.gov/const/www/c30index.html. That number was 1.7% higher than the upwardly revised figure for December of $863 billion (originally estimated at $858 billion) and 2.1% higher than in January 2002. Private residential building construction (up 2.5% for the month and 12% over the year-ago month) and public construction (+1% for the month and 0.6% compared to January 2002) both set records.
Private nonresidential building construction slipped by 0.3% for the month and 15% relative to January 2002. Another Commerce Department agency, the Bureau of Economic Analysis, estimated Friday that fourth-quarter 2002 real (inflation-adjusted) investment in private nonresidential structures was down for the fifth straight quarter, by 10%, compared to -21% in the third quarter. That figure is a component of real gross domestic product, which rose at a seasonally adjusted annual rate of 1.4% in the fourth quarter of 2002, not 0.7% as initially estimated
Several reports on manufacturing give a mixed view. On the plus side, detailed Census figures on value of construction www.census.gov/const/C30/newtc.html show that the value of manufacturing structures rose by 0.9% for the month, after plunging 30% since January 2002. The Census Bureau reported Thursday that new orders for manufactured durable goods, except semiconductor manufacturing, rose by a seasonally adjusted 3.3% from December to January and 4.9% year-over-year. The gain followed a 0.4% drop in December and was spread through all categories except aircraft and defense capital goods.
However, two other reports today are gloomy about the outlook for manufacturing. A survey by the National Association of Manufacturers found that of approximately 300 respondents, 15% expect to spend less on equipment and software this year, and 63% expect such expenditures to grow less than 5%. And the Institute for Supply Management's monthly index fell to 50.5 in February from 53.9 in January. ISM states that a value above 50 indicates that the manufacturing sector is generally expanding. But only 10 of 20 manufacturing industries reported growth.
Personal income rose 0.3% in January, seasonally adjusted, BEA reported today, matching the changes of the previous four months. However, personal consumption expenditures, the broadest measure of personal spending on goods and services, fell by 0.1%, following increases in the previous three months. Both December's unusually large rise (1%) and January's drop and reflected a surge, then pullback, in new vehicle buying. Meanwhile, reports this afternoon from GM, Ford, Chrysler and several import makers show that new vehicle sales also fell in February, as widespread heavy storms crushed sales in the traditionally heavy President's Day week.
The house price index of houses that have resold or been refinanced rose by 6.9% from the fourth quarter of 2001 to the fourth quarter of 2002, the Office of Federal Housing Enterprise Oversight reported today www.ofheo.gov/house. The index slowed to 0.8% growth in the fourth quarter alone (an annual rate of 3.3%) from 1.4% (originally estimated at 0.8%). For the fourth quarter, three states (VT, WY, AL) and 22 metro areas had declining prices, compared with seven states and 33 areas in the third quarter.
Two reports on January home sales released last week paint a contradictory picture. On Thursday, Census reported that new-home sales plummeted 15% in January. Census estimated the median sales price was $182,300, down 2.6% from January 2002. The number of homes for sale at month's end rose 2% to a 4.5 months' supply, the highest in over a year. But last Tuesday the National Association of Realtors reported that existing home sales rose 3% in January from an upwardly revised December total to another record, 2% above the record set in January 2002. The median sales price was nearly 7% higher than a year ago. Homes for sales were 4.5 times monthly sales, up from 4.3 times in December. Weather factors make January data tricky, since seasonal adjustments apply to multi-year averages, not extremes.
Kenneth D. Simonson is chief economist for the Associated General Contractors of America, 333 John Carlyle Street, Suite 200, Alexandria, VA 22314. He can be reached at 703-837-5313; fax -5406; e-mail email@example.com, and website www.agc.org.