Construction Spending Remains Weak

Construction spending remains weak but indications on housing do show limited improvement. Total construction spending fell 0.4 percent in September for a year-on-year decline of 0.2 percent. But residential spending rose 0.5 percent in the month with this year-on-year rate at plus 0.9 percent. The breakdown here though is mixed as the key single-family category could muster only a monthly rise of 0.1 percent. Multi-family construction is once again the strength, rising 2.0 percent in the month to extend an upward trend that reflects gains in current rental rates.

The real weak area is in the non-residential side of the report where spending on private construction fell 1.0 percent in the month and with public construction down 1.1 percent for its poorest showing since March 2014. Nearly all components on the nonresidential side show monthly declines with commercial, down 2.4 percent, and Federal spending, down 1.9 percent, showing the most weakness.

The construction sector, despite unusually low mortgage rates, has been struggling this year with the softness in single-family housing posing continued challenges for what is otherwise a strong new home market.

Recent History Of This Indicator:
Outside of commercial offices and multi-family homes, construction spending has been very soft this year but is expected to rebound in September's data where the consensus is for a 0.6 percent gain. Construction spending on new single-family homes fell 0.9 percent in August for the third monthly contraction in a row. Private nonresidential spending in August fell 0.4 percent with public spending showing similar weakness. But office spending has been very strong, up nearly 30 percent year-on-year while multi-family homes show a 14 percent yearly gain. This report, where oversized revisions are common, has been very erratic this year.