US: Construction Spending

Fri Jan 02 09:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Construction Spending - M/M change 0.5% -0.5% to 0.8% -0.3% 1.1% 1.2%
Construction Spending - Y/Y change 2.4% 3.3% 4.0%

Construction outlays slipped 0.3 percent in November after a sharp 1.2 percent rebound in October. Market expectations were for a 0.5 percent gain.

November's decrease was led by public outlays which fell 1.7 percent after a 2.8 percent jump in October. Private residential spending rose 0.9 percent, matching the pace the month before. Private nonresidential construction spending dipped 0.3 percent in November after edging up 0.1 percent in October.

On a year-ago basis, total outlays were up 2.4 percent in November compared to 4.0 percent in October.

The construction sector is slowing, tugging down on fourth quarter GDP.

The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.

Construction spending has a direct bearing on stocks, bonds and commodities because it is a part of the economy that is affected by interest rates, business cash flow and even federal fiscal policy. In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends.

Businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home.

A portion of construction spending is related to government projects such as education buildings as well a highways and streets. While investors are more concerned with private construction spending, the government projects put money in the hands of laborers who then have more money to spend on goods and services.

On a technical note, construction outlays for private residential, private nonresidential, and government are key inputs into three components of GDP--residential investment, nonresidential structures investment, and the structures portion of government expenditures.

That is why construction spending is a good indicator of the economy's momentum.