Highlights
Construction spending in January fell further and across all key categories, suggesting that the overall economy may be slipping into negative territory. Construction outlays continued its recent decline with a 1.7 percent fall, following a 1.3 percent drop in December. The decrease in January was greater than the market projection for a 0.7 percent fall. January's drop in construction spending was led by a 3.0 percent drop in private residential outlays. Public outlays and private nonresidential outlays also declined by 0.2 percent and 1.2 percent, respectively.

By components nonresidential declines were wide-spread and seen in lodging, down 3.0 percent; commercial, down 0.3 percent; health care, down 1.0 percent; communication, down 5.6 percent; power, down 4.5 percent; and transportation down 2.5 percent.

By components nonresidential gains were seen in office, up 0.7 percent; religious, up 0.8 percent; amusement, up 1.0 percent; manufacturing, up 0.1 percent; and educational, up 2.1 percent.

On a year-on-year basis, overall construction outlays were down 3.3 percent in January.

Overall, the construction sector clearly has turned negative with public and private nonresidential components no longer being positive and offsetting the long-running negative numbers for private residential construction. While not a clincher, today's numbers suggest that January could be the month that the economy slipped into a mild recession. Bonds should like the numbers but equities likely will not. Today's ISM report for February was negative also and should reinforce these market reactions.

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