Construction Spending Looking Solid

Construction spending looks solid, up a better-than-expected 0.6 percent in September with gains led by housing components. Residential spending extended six months of strong gains with a 1.9 percent increase for a year-on-year gain of 17.1 percent which is 3 percentage points better than the rate for total construction, at 14.1 percent. New multi-family units continue to lead the residential component, up 4.9 percent for a 26.7 percent year-on-year gain, while new single-family homes rose 1.3 percent for a more than respectable year-on-year gain of 12.7 percent.

Private nonresidential construction has also been strong this year but not in September, down 0.7 percent including declines for most subcomponents especially both power and commercial. Still, the year-on-year rate for private nonresidential is plus 14.9 percent. Readings on public construction, up a total 0.7 percent in the month, are also favorable with subcomponents trending at or near double-digit year-on-year growth.

The gains in this report, especially for multi-family units, are the outcome of a spike in permits during the spring. Permits, however, have not been showing great strength in recent months, in turn pointing to moderation for what still looks to be, however, a solid construction sector.

Recent History Of This Indicator:
Construction spending, expected to rise 0.4 percent in September, may be ramping up but sales of new homes, at least, are moving lower. The residential component of this report has been a center of strength, up 1.3 percent in August for a year-on-year rate of plus 16 percent. But new homes of this component, unlike multi-family homes, have been lagging.