Economy Watch: Construction Edges Down in February, But Up Over Last 12 Months

By Dees Stribling, Contributing Editor

U.S. construction spending edged down a little in February, according to the Census Bureau on Monday, dropping 1.1 percent month-over-month. Compared with the same month in 2011, however, construction spending was up total of 5.8 percent, with construction on both residential and nonresidential projects increasing year-over-year. Private residential and nonresidential projects, that is. All of the annual gains were the result of private construction, since the velocity and value of public construction projects were down since February 2011, and have in fact been declining since the onset of the budget-busting recession.

A few categories of private nonresidential construction gained ground between January and February. Leading the way was religious-structure construction, up 2.7 percent month-over-month (but down 9.4 percent since last year). Also advancing for the month was manufacturing-related construction, up 1.7 percent. The only public construction categories up for the month were public safety (up 1.2 percent), power (up 1.7 percent) and sewers (up 0.8 percent).

Year-over-year, private residential construction was up 5.6 percent, a good bit of which was for apartment projects, the current golden child in residential development. Private nonresidential construction saw an even larger annual jump, up 14.5 percent in February, as private power companies; schools and universities; hospitals and other health-care providers; and even recreational providers developed new facilities. By contrast, on the losing ends of nonresidential development over the last 12 months were hotels; religious structures (despite the early 2012 uptick); and communication infrastructure (the nation might have all the cell phone towers that it needs).

Manufacturing sector still expanding

The Institute for Supply Management said on Monday that activity in the U.S. manufacturing sector expanded in March for the 32nd consecutive month—for nearly three years—with the organization’s Purchasing Managers’ Index up 1 percentage point to 53.4 in March. A PMI reading of more than 50 means expansion in the manufacturing sector, while a reading of more than 42.6 means an expansion in the overall economy.

The ISM’s Production Index increased 3 percentage points from February’s 55.3 percent to 58.3 percent in March, and its Employment Index increased 2.9 percentage points to 56.1 percent in March. Of the industries included in the survey, 15 are experiencing overall growth, while only two—computer and electronic products, and chemical products—are suffering contractions.

Commodities were generally more expensive for manufacturers in March than the month before, but so far not even the increase in the price of gasoline and other fuels has taken the wind out of the sails of the sector. Only natural gas and (maybe) steel dropped in price during the month, according to the survey (steel was reported both up and down in price).

Euro zone suffers, China doing better

Eurostat, the pan-European agency that collects economic data about the EU, released some unsurprising unemployment figures for the euro zone on Monday. Namely, that the 17-nation euro zone reached an unemployment rate of 10.8 percent in February, up 0.1 percentage points from January, and the highest level for the zone in nearly 15 years.

Perhaps the surprise is that the euro-zone unemployment rate isn’t any higher than it is, though economists are predicting it will touch 11 percent before the year is out. But lumping all the nations that use the euro together is somewhat distorting, considering (for example) that the unemployment rate in Germany is 5.7 percent—which most any nation would be glad to have now—while at the other end of the joblessness spectrum, Spain is suffering a Great Depression-like 24 percent unemployment rate.

On the other hand, the news from China was considerably better on Monday, with the government reporting that its Purchasing Managers’ Index, which surveys more than 800 large companies in 20 industries, reached at 53.1 in March, an 11-month high. The private HSBC PMI, which focuses on smaller and mid-sized Chinese companies, was only up a little in March to 48.3, but even that reading indicates that the nation’s economy isn’t doing as badly as all that.

Wall Street had a reasonably good run to begin the second quarter of 2012, ending up for the day. The Dow Jones Industrial Average gained 52.45 points, or 0.4 percent, while the S&P 500 was up 0.75 percent and the Nasdaq gained 0.91 percent.