Construction Spending Report Mostly Weak

Multi-family units are just about the only strength in what is a weak construction spending report for August, down 0.7 percent on the month with July revised 3 tenths lower and into the negative column at minus 0.3 percent. Construction spending on new single-family homes fell 0.9 percent for the third monthly contraction in a row. This belies solid strength in new home sales and points to continued lack of supply in the new home market. But multi-family units are a different story, up 2.4 percent and, with July and June both revised higher, the fourth gain in a row. Strength here reflects expectations of strength for the rental market.

Nonresidential construction is weak across nearly all readings with commercial structures down 2.0 percent in the month, power down 1.5 percent, and manufacturing down 1.4 percent. These readings all reflect lack of business investment which is the economy's stubbornly weak suit. Public spending is also weak, down 0.4 percent for educational structures and down 2.9 percent for highways and roads. Positives are hard to find but do include a 2.3 percent gain in office structures and a 4.0 percent rise in federal structures, the latter offset by a 2.5 decline at the state & local level.

Year-on-year rates confirm the weak trends with single-family homes down 1.5 percent and total construction spending down 0.3 percent. The big plus here, once again, is multi-family units where year-on-year spending is up a robust 13.9 percent. But multi-family units make up only 5 percent of total construction spending which otherwise is not having a great year.

Recent History Of This Indicator:
Monthly data on construction spending have been very erratic but not the longer trend which has been flat. Spending on new multi-family homes has been strong but not new single-family homes which is barely growing. On the non-residential side, spending on office and commercial structures has been positive and helping to offset declines in public spending. Following July's no change results, forecasters see August total spending rising 0.3 percent. Oversize revisions are common for this series.