Construction Spending Unchanged

Capital goods readings in Tuesday's durable goods report were weak as is nonresidential spending in today's construction spending report for January, weakness that held total spending unchanged in the month. Private nonresidential spending fell 1.5 percent pulled down by the power, commercial, and office components. Year-on-year, nonresidential spending is down 1.1 percent and focuses attention on whether business confidence is as strong as advertised in reports like this morning's ISM manufacturing.

Housing continues to grow with residential spending up 0.3 percent in the month for a year-on-year gain of 4.2 percent. Single-family homes are holding up this component, up 0.6 percent in the month and 8.8 percent on the year, and offsetting a 1.3 percent decline for multi-family units where the yearly rate is minus 2.4 percent. Home improvements, like single-family homes and a reflection of consumer strength, are a plus, up 0.2 percent in the month with annual growth at 6.6 percent.

Housing is a larger category than nonresidential spending reflected in the total year-on-year rate which is at plus 3.2 percent, moderate but respectable. And public spending, which is a separate category concentrated in educational building and roads, is also contributing, up 1.8 percent on the month and 8.2 percent on the year. And spending here, given the outlook for new deficit spending, could prove to be an accelerating plus for the construction outlook.