The dollar value of construction put in place fell 0.2 percent in January after rising 1.1 percent in December. The January decline is below the consensus of up 0.2 percent in the Econoday survey of forecasters. The decrease is due to a 0.4 percent dip in spending on nonresidential construction while residential construction is up 0.2 percent from the prior month.

The increase in residential construction is entirely due to a 0.6 percent rise the value of construction of single-family homes in January; multi-unit construction is down 0.4 percent. Spending on home improvement total private residential spending less spending on single- and multi-unit construction fell 1.0 percent in January. Compared to a year ago, spending on private residential construction was up 5.2 percent with single-unit construction up 12.5 percent and multi-unit up 7.9 percent. Despite mortgage rates at 20-year or more highs, the dearth of inventory in the existing unit housing market is supporting activity in the new home market.

The decrease in nonresidential construction spending reflects mixed activity. However, it is notable that spending on manufacturing construction rose 2.1 percent in January from December and was 36.6 percent higher than a year ago. Some of this will reflect higher construction costs, but it also shows that manufacturers are investing in infrastructure.

Spending on public construction projects fell 0.9 percent in January from December, but was up 20.1 percent from a year earlier. However, construction of public residential buildings rose 1.9 percent in January from the prior month and was up 16.7 percent from January 2023. This may be due to the pressing need for affordable housing in many parts of the country.

Construction spending has shown only limited effects from high financing rates. After jumping a much higher-than-expected 0.9 percent in December, spending in January is expected to rise 0.2 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.