One indicator of where we are in the economic recovery is the Gross Domestic Product (GDP), a measure of the output of goods and services produced by labor and property as reported by the US Department of Commerce’s Bureau of Economic Analysis. Their most recent analysis of the final quarter of 2010 gives a bit of good news. Yesterday Bloomberg reported that commercial construction contributed to the gross domestic product in the last quarter of 2010, after delivering a deficit to the number during every quarter since the middle of 2008.
Even more promising, the article points to the close relationship between commercial construction spending and another market indicator, the Federal Reserve’s Industrial Production and Capacity Utilization index, which measures what US factories, mines and utilities produce. Bloomberg’s chart shows that commercial construction generally follows the same pattern as industrial production, only about a year afterwards. Since industrial production has been increasing since June 2009, some economists believe that construction is on the brink of a big upswing. This is news we have been looking for.