Analysis and discussion of issues that impact business

These numbers continue to show evidence of the cooling housing market.

The Commerce Department reported Friday that construction activity dropped to a seasonally adjusted annual rate of $1.20 trillion in July, down 1.2 percent from the June level. It was the biggest one-month decline since a 1.3 percent fall in August 2001, when the country was mired in the last recession.

But are things as bad as they seem?

Now, these numbers aren't encouraging, but they might be signs of stability.

The July decline, which followed a 0.4 percent increase in June, was led by a 2 percent fall in private residential construction.

It was the fourth consecutive decline in residential construction and the biggest drop since January 2002, providing dramatic evidence that the nation’s five-year housing boom has come to an end.

I'm just wondering if the housing "boom" is similar to the dot com "boom". Both show signs of being artificial.

Builder confidence has plunged this year as they have struggled with weakening demand in the face of rising mortgage rates. A record backlog of unsold homes has forced many builders to offer an array of incentives to reduce supplies.

It looks to me like builders have just kept building, in the hopes that they'd sell what they built. So, once again my suspicions about "speculators" being an underlying cause of our economic woes are inflamed. It reminds me of the story of the 2 guys being chased by an angry bear. The first man breathlessly exclaimed he didn't think they could outrun the bear. The second one replied, "I don't have to outrun the bear. I just have to outrun you."

Outside of housing, there continued to be areas of strength in construction as nonresidential private building activity edged up 0.3 percent to a record annual rate of $303.5 billion. Gains in July came in construction of office buildings, power plants and transportation facilities.

It looks like some thanks should go to the government for underwriting the construction industry.

Once again paranoia proves good fodder for a blogger!