Construction spending surges to 8-year high

Dive Brief:

  • Construction spending surged 1.5% between December and January to a seasonally adjusted annual rate of $1.141 trillion, the Commerce Department reported Tuesday. 
  • Private nonresidential construction spending rose 1.0% in January, while residential spending remained at roughly the same level as the previous month. Within residential, single-family home construction slipped 0.2%, and multifamily grew by 2.6%. Public construction spending soared 4.5% last month.
  • Spending in January was 10.4% higher than January 2015, and it reached the highest level in eight years.

Dive Insight:

January's spending results far surpassed expectations, as economists surveyed by MarketWatch predicted only a 0.2% increase.

The Commerce Department report coincides with the January starts results from Dodge Data & Analytics, which found January's monthly construction starts increased 2% from December to a seasonally adjusted annual rate of $607.9 billion.

The mediocre results for the residential sector echo the somewhat disappointing home sale and housing start reports this month. Homebuilder confidence slipped three points to a score of 58, housing starts unexpectedly slipped 3.8%, and new home sales dropped 9.2% in January. On the bright side, however, existing home sales surpassed expectations and rose a slight 0.4% last month.

However, the January spending surge should offer an overall positive takeaway for the construction industry, which expressed concern with November's spending decline and the slight 0.2% gain in December.

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U.S. Commerce Department: JANUARY 2016 CONSTRUCTION AT $1,140.8 BILLION ANNUAL RATE