The dollar value of construction put in place in February fell 0.3 percent from January after an unrevised decline of 0.2 percent in January. The gain is well below the consensus of 0.5 percent in the Econoday survey of forecasters. Weaker spending is entirely due to a 1.0 percent decrease in nonresidential construction spending that was only partially offset by a 0.7 percent increase in residential construction. Total spending was up 10.7 percent compared to February 2023.

Increases in private residential construction spending in February were led by single-family homes which rose 1.4 percent; home improvement rose 0.2 percent while spending on multi-family homes fell 0.2 percent (home improvement spending is calculated by subtracting the total for single- and multi-family homes from total residential spending). Demand for new single-family homes remains solid while inventories of existing homes remain sparse.

Nonresidential spending was down on broad-based declines, although much of the sector was up substantially compared to a year ago. Private nonresidential spending was unchanged while public construction spending fell 1.2 percent in February on the month but was up 16.8 percent compared to February 2023. Public construction declines were broad-based.

It is notable that in both private nonresidential and public construction the only categories to show month-over-month gains were in transportation. Private transportation spending rose 0.4 percent in February from January and public transportation spending was up 0.8 percent.

Construction spending is expected to increase 0.5 percent on the month in February versus January's 0.2 percent dip that reflected a downturn for nonresidential spending which offset a rise for residential.

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.