| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Month over Month | 0.5% | -1.1% to 0.8% | 0.5% | 0.7% | 0.9% |
| Year over Year | 7.4% | 5.5% | 5.6% |
Highlights
The value of construction put in place in August is up 0.5 percent from July and July is revised higher to up 0.9 percent. The August increase matches the consensus the 0.5 percent in the Econoday survey of forecasters.
Total residential construction is up 0.6 percent in August and nonresidential up 0.4 percent. Residential construction continues to rise due to limited supplies of available existing homes, while nonresidential is benefiting from investment in infrastructure. Overall, spending on new construction is solid despite higher financing costs as economic growth continues at a moderate pace.
The value of construction of new single-family homes is up 1.7 percent in August and is up 0.6 percent for multi-unit homes. Homebuilders are trying cautiously to fill the gap left by current homeowners of single-family units remaining in place and keeping supply off the market. There also remains demand for multi-unit homes as renters and/or first-time homebuyers are opting for smaller, more affordable units. However, the increase in the 30-year fixed rate for home mortgages to over 7 percent is putting a damper on homebuying activity. Homebuilders are already cutting back on new construction in September.
Nonresidential construction spending is up in some of the biggest categories. Manufacturing sees a 1.2 percent rise in August, highway and street is up 0.4 percent, and power is up 0.4 percent. However, construction of commercial properties is down 0.9 percent.
Total residential construction is up 0.6 percent in August and nonresidential up 0.4 percent. Residential construction continues to rise due to limited supplies of available existing homes, while nonresidential is benefiting from investment in infrastructure. Overall, spending on new construction is solid despite higher financing costs as economic growth continues at a moderate pace.
The value of construction of new single-family homes is up 1.7 percent in August and is up 0.6 percent for multi-unit homes. Homebuilders are trying cautiously to fill the gap left by current homeowners of single-family units remaining in place and keeping supply off the market. There also remains demand for multi-unit homes as renters and/or first-time homebuyers are opting for smaller, more affordable units. However, the increase in the 30-year fixed rate for home mortgages to over 7 percent is putting a damper on homebuying activity. Homebuilders are already cutting back on new construction in September.
Nonresidential construction spending is up in some of the biggest categories. Manufacturing sees a 1.2 percent rise in August, highway and street is up 0.4 percent, and power is up 0.4 percent. However, construction of commercial properties is down 0.9 percent.
Market Consensus Before Announcement
Construction spending for August is expected to rise 0.5 percent following July's 0.7 percent increase that once again showed sharp residential gains versus flat nonresidential results.
Definition
The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.
Description
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.
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.
