Even With ZIRP Still Firmly In Place, Real Construction Spending Falls Sharply

The headline number for construction spending for August was a seasonally adjusted month to month decline of -0.8%. That shocked the market. The consensus guess of Wall Street economists was for a 0.4% gain. For once, the headline number and the not seasonally adjusted actual number, adjusted for inflation sent the same message.

Real construction spending was down 1.5% year over year. This was the second year over year decline in the past 10 months. Construction spending has increased just 8.9% since the 2011 low.  It is down 27.9% since the 2007 peak and still 9.5% below the bottom of the previous recession in 2002.

Real Construction Spending

The economy is now so fragile and so dependant on ZIRP that any increase in interest rates at all could cause an even bigger collapse than in 2008. The Fed has boxed itself into a corner. I can only imagine that at some point we face a massive reset with horrific consequences.