A monthly decline for nonresidential construction, the first in seven months, combined with a seventh straight residential decline to pull total construction spending 0.4 percent lower in December. This is below expectations and toward the lower end of Econoday's consenus range which, combined with a weaker-than-expected ISM manufacturing index also released at 10:00 a.m. EST this morning, leaves Econoday's Consensus Divergence Index in the red zone at minus 9, ending two weeks of strength to now indicate that US economic data are coming in below economists' forecasts, at least to a modest degree.

Driven by wide declines that include manufacturing, health care, and educational building, nonresidential spending fell 0.5 percent on the month though year-over-year growth edged only 1 tenth lower to a still very strong 13.8 percent. Yearly growth for residential spending, in contrast, is only 1.6 percent, down from 4.3 percent in November. December's monthly residential decline was 0.3 percent. Yearly growth for total construction fell 8 tenths to 7.7 percent.

Residential spending has of course been suffering from higher mortgage rates which have had less of an effect on nonresidential spending that for the last four months has exceeded spending on the residential side, at an annualized rate of $943.5 billion for the former in December versus $866.3 billion for the latter.

After edging 0.2 percent higher in November, construction spending for December is expected to slip 0.1 percent. Spending has been flat in recent months as gains in non-residential construction have been offset by declines on the residential side.

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.