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Since the turn of the Millennium, a downturn in manufacturing has not been enough to tip the economy into recession. There must also be a decline in construction as well.

This morning’s construction spending report for February painted a substantially different picture depending on whether the data was looked at nominally or in real inflation adjusted terms.

Nominally total construction spending (blue in the graph below) rose 0.7% in the month to yet another new all-time record; while residential spending (red, right scale) rose a sharp 1.3%, close to a 12 month high:

But when we deflate by the cost of construction materials, the picture is not so rosy:

So adjusted, total spending actually declined -0.1%, and residential spending rose 0.4%. 

The picture for the leading residential sector is that spending has been trending sideways (much like permits, starts, and sales) for the past year, while total construction is slowing. In fact in real terms it has not advanced in four months.

Finally, the boom in manufacturing construction has also ended:

The overall picture for the entire goods producing sector of the US economy from this morning’s ISM and construction spending reports is that both manufacturing and construction are almost right at the juncture between expansion and contraction.

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