The dollar value of construction put in place in December is up 0.9 percent after an upward revision to up 0.9 percent in November. The December increase is above the consensus of up 0.5 percent in the Econoday survey of forecasts. Construction spending is up 13.9 percent compared to December 2022. Total construction spending increased 1.4 percent for residential and 0.4 percent for nonresidential. Spending on residential building is up 6.8 percent compared to a year ago, mainly due to the demand for new housing while supplies of existing units are lean. Nonresidential construction spending is up 20.1 percent compared to December 2022, probably reflecting a need to get public projects started after funding delays.

Total private construction spending is up 0.7 percent in December due to a 1.4 percent rise in residential that was partially offset by a decrease of 0.2 percent in nonresidential.

Spending on new single-family homes is up 1.6 percent in December and up 0.3 percent on multi-unit properties. Spending on home renovation and repairs total private residential spending less single- and multi-unit spending is up 1.7 percent in December. Current homeowners who have low mortgage rates are more likely to reinvest in their current properties rather than put their home on the market to up- or down-grade living arrangements. As noted above, the limited supplies of existing homes are providing new homebuilders with an opportunity to fill the gap in the market.

Private nonresidential construction is feeling the pinch of higher financing costs.

Public construction is up 1.3 percent in December on broad-based gains. In particular, spending on highways and streets is up 4.1 percent in December.

Construction spending has shown only limited effects from high financing rates. After rising 0.4 percent in November, spending in December is expected to rise 0.5 percent.

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.