Inside the Numbers
Seasonal Trends Seasonal trends and adjustments across the various housing statistics are actually quite different. Total construction spending tends to bottom-out in February on a NSA basis before the seasonal rebound in the spring. On a SA basis, we have seen slower growth in the first half of the year over the last three years, followed by stronger gains in the second-half of the year -- especially in December. But, new seasonal factors with the benchmark revisions have helped to offset some of this seasonal pattern.

Overall, construction spending generally fell short of the seasonal pattern during most of the months of 2007. That pattern is continuing in 2008. Revision Analysis The following chart shows the old data with our forecast compared to the new data, with revisions. Note the big upward revisions in both January and February.

Private Residential Construction
Private residential construction is made up of new housing activity and home improvement. Strength in the series completely collapsed in 2006, leaving the y/y figure in deep negative territory after posting double-digit gains for much of 2004 and 2005. The weakness extended through all of 2007 and is continuing in 2008.

Private Nonresidential Construction
Nonresidential construction spending has posted persistent strength since the upturn for this sector at the start of 2004. Not surprisingly, the nonresidential construction series tends to be correlated with the labor market, as need for commercial space changes with the level of employment. Strength emerged in 2004 just as employment surpassed its prior cyclical peak. The under performance of payroll growth through the 2001-2003 period left private nonresidential construction lagging the stellar performance of the residential sector at the time.

This sector is now making up for past tepid growth, although the weakening trend in job growth over the last year suggests a more throttled pace for nonresidential construction in 2008.