Construction spending in July slipped 0.6% to $1.08 trillion at a seasonally adjusted annual rate (SAAR), the Census Bureau reported today. Year-to-date (YTD) spending in the first seven months of 2008 was down 5.4% from the same period of 2007. The declines were concentrated in private residential spending, which fell 2.3% for the month and 28% YTD. Private nonresidential spending fell 0.7% in July but rose 19% YTD, and public construction spending climbed 1.4% and 7.5%. Despite weakness in July, every private nonresidential category is up YTD except religious structures, the segment most closely tied to new residential development. The largest YTD gains among major nonresidential segments were in manufacturing, 46% (projects include refineries, biodiesel, cement, steel and transportation equipment plants); lodging, 38%; power, 33% (including power plants, transmission lines, wind and other renewable power facilities); and office, 16%. The other large nonresidential groups showed more modest gains: education, 9.7%; highways and streets, 3.2%; and commercial (retail, wholesale and farm), 3.0%. Census also updated tables that show how many months it takes to complete multifamily, private nonresidential and state and local projects. Inflation-adjusted gross domestic product (real GDP) rose 3.3% (SAAR) in the second quarter, revised from an “advance” estimate of 1.9%, the Bureau of Economic Analysis (BEA) reported on Thursday. Real private and government investment in structures jumped 14% and 6.4%, respectively. Unlike Census, BEA includes wells and mineshafts in structures. The price indexes for private and government investment in structures rose 3.6% and 3.7%. These increases are far below the 10% rise in the producer price index (PPI) for inputs to construction industries from June 2007 to June 2008 that the Bureau of Labor Statistics (BLS) reported in July. The PPI reflects the sharp increase in material costs paid by contractors, whereas the BEA indexes show the completed costs of projects, including labor costs, overhead and profit. Many contractors report shrinking or negative profits because of increased competition from contractors migrating from residential work or slow-growth regions and because they cannot pass on material costs for projects already under way. Price increases for many construction-related commodities have slowed or reversed. Construction-related items that rose in price in August included aluminum, freight and fuel surcharges, polyvinyl chloride (PVC) and other plastics, and steel, according to a monthly survey of manufacturing purchasing executives that the Institute for Supply Management released today. Copper was down in price; diesel fuel was listed as both up and down. Bloomberg News reported today, “Commodities tumbled the most since March, led by energy prices, as Hurricane Gustav spared U.S. Gulf petroleum rigs the destruction caused by Katrina and Rita in 2005. Natural gas tumbled the most in more than a year, crude oil fell to a five-month low” and copper to a seven-month low. A Data DIGest reader reported on Friday that structural steel prices will be unchanged in September after increasing every month so far this year. AGC of Minnesota reported today, “Things in MN seem to be loosening up with regard to [asphalt cement] availability. Several firms had signed contracts for polymer-modified asphalt that was in danger of not being honored by the supplier through force majeure. That seems to have been worked out as supply has eased and the DOT has allowed for some materials substitution and time extension etc.” Two reports last week showed the range of economic growth by locality. On Wednesday, BLS reported, “Among the 310 metropolitan areas for which nonfarm payroll data were available in July, 188 [had] over-the-year increases in employment, 110 reported decreases, and 12 had no change…The largest [percentage gain was] in Grand Junction, Colorado, 4.9%; followed by McAllen-Edinburg-Mission, Texas, 4.6%; Odessa, Tex., and Pascagoula, Mississippi, 3.5% each; El Paso, Tex., and Kennewick-Pasco-Richland, Washington, 3.4% each….The largest over-the-year percentage [drop was] in Flint, Michigan, -5.9%; followed by Cape Coral-Fort Myers, Florida, -4.2%; Elkhart-Goshen, Indiana, -3.6%; and Lake Havasu-Kingman, Arizona, -3.4%.” Areas with prolonged large gains or losses can be good prospects for construction activity or employees willing to relocate, respectively. On August 26, the Office of Federal Housing Enterprise Oversight (OFHEO) reported that the average price of houses sold in the second quarter with financing from Freddie Mac or Fannie Mae fell 1.4%, seasonally adjusted, from the first quarter and 4.8% from one year before. An index that includes refinancing also fell 1.4% in the quarter but only 1.7% over four quarters. OFHEO commented, “The five states with the greatest price appreciation between the second quarters of 2007 and 2008 were: Oklahoma, 4.9%; Wyoming, 4.4%; South Dakota, 3.8%; North Carolina, 3.6%; and North Dakota, 3.6%. The five states with the sharpest depreciation for the same period were: California, -15.8%; Nevada, -14.1%; Florida, -12.4%; Arizona, -9.2%; and Rhode Island, -4.8%. The [metros] with the greatest appreciation over the past year were Houma-Bayou Cane-Thibodaux, Louisiana, 9.1%; Decatur, Alabama, 6.4%; and Charleston, West Virginia, 6.0%. Of the 20 ranked cities with the greatest price declines over the last four quarters, all but one (Las Vegas-Paradise) were in California or Florida. The [metros] with the sharpest depreciation over the year were Merced, Cal., -34.5%; Stockton, Cal., -31.7%; and Modesto, Cal., -28.5%. House price changes have a major bearing on the capacity of school districts and other local governments to fund construction that is backed by property tax receipts.