- by New Deal democrat
This morning the construction spending report for January was released (note that this is still about 3 weeks later than usual, so last autumn’s government shutdown continues to reverberate in the data). In the past I have used it to help track the long leading sector of housing, but in the wake of the Inflation Reduction Act, plus the chaos now in Washington, it has also been useful to track manufacturing. And finally, via private construction of water supply, as a proxy for construction of AI data centers.
And with the exception of that last item, the numbers in January, even nominally, were all negative. Total construction spending declined -0.3%, residential spending down -0.8%, and manufacturing spending down -2.0%. Non residential spending as a whole declined -0.4%. But spending on water supplies increased a sharp 3.3%. Below are all of the above, normed to 100 as of one year before (January 2025). I also show the PPI for construction materials to show how much spending there was for each in “real” terms:
Since the cost of construction materials (red) increased 6.6% during the 12 month period, only spending on (likely AI data center related) water supply increased in real terms.
Here is the same data measured YoY:
Note that almost every sector of construction has either slowed down or turned negative in the past year, and in particular manufacturing construction has declined sharply. Only residential construction has rebounded slightly on a nominal basis, and in real terms bottomed last spring. In contrast, the Boom in water supply construction is apparent. Notably, as shown in the graph below, even spending on water supply construction in real terms has declined since last September:
Most importantly, this paints a picture of spending in the two leading sectors - housing and manufacturing - declining through 2025.
This is yet more evidence that the only sector which has been keeping the economy out of recession recently has been that releated to AI data centers.
