The downtrend in construction projects continues, as construction spending fell 0.6% in November -- its seventh straight monthly decline, the U.S. Commerce Department announced Monday.What's more, construction spending is now at its lowest level in more than six years -- a seasonally-adjusted annual rate of $900.1 billion -- and is down 13.2% on a year-over-year basis.

%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%% During the first 11 months of 2009, construction spending totaled $868.9 billion, 12.7% below the $994.9 billion for the same period in 2008.

A Bloomberg News economists survey had expected November construction spending to decline 0.5%. Construction spending fell a revised 0.5% in October, compared to the previously released statistically flat reading; spending also declined 1.6% in September.

In November, private sector spending declined 0.7% and public sector spending fell 0.4%. Private home construction decreased 1.6%, highway construction declined 2.9% and educational construction dipped 0.1%.

It isn't hard to identify the big drag in the year-over-year construction data: Private residential construction spending -- which includes single-family homes -- has plummeted 19.2% in the past 12 months to $250.7 billion. Given that residential construction accounts for about 28% of all U.S. construction activity, one can see how a deep recession in the housing sector could pull the overall construction statistic lower, even amid signs of firming in other construction categories.

Housing Analysis

November's construction data provides hints regarding the U.S. housing sector, construction activity, and the shape of the U.S. economy in the years ahead. First, the sharply lower year-over-year single family home construction data has skewed the overall U.S. construction picture: Without the major decline in home building, the U.S. construction activity would look decidedly healthier.

Although that's like saying "if a car only needed three wheels to move, that flat tire in the front wouldn't matter." In other words, the U.S. economy historically has relied on housing: It's been a key engine of growth in every post-World War II economic expansion. But that's likely to change. Massive overbuilding during the previous decade (2000-2009), and the resulting housing bust means housing undoubtedly will not play as large a role in U.S GDP growth in the current decade.

What will serve as the "spare tire" and help move the U.S. GDP needle? That's a compelling question for policy makers and business executives alike. They must identify engines of growth to make up for what surely will be a smaller housing sector in the current decade. More than likely, given housing's impact on lateral sectors (appliances, furniture, insurance, among others), it will take several sectors to compensate for the scaled-down housing industry.

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