Utah residential construction shows an upward trend of declines

Construction permit values ring through the economy more than twice. Once a project is permitted, purchases of taxable items commence. From the foundation that includes cement, lumber and steel to furnishings, drapes and landscaping most items are taxable for sales tax purposes. In addition, once new residential subdivisions are completed demand for nonresidential retail outlets follow a year or two later.

Until December's 25 percent increase, residential construction permit values fell between 40 percent and 70 percent per month since late 2007. During the last three months, residential construction values fell 32.5 percent compared to a year earlier. April's 26.2 percent decline, followed by March's 50 percent drop and February's 19 percent decline, seem to extend the upward trend of declines (chart below), at least compared to early 2008's 60 percent decreases.

Hopefully, we are in the early stages of a "bottoming out". When these declines turn into positive gains, sales taxes will start improving.

Sources: Utah League of Cities and Towns, Doug Macdonald.