Dive Brief:
- Construction spending dropped 0.4% in September to a seasonally adjusted annual rate of $1.150 trillion, below the upward-revised rate of $1.154 trillion in August, the Commerce Department reported Tuesday.
- Private nonresidential construction fell 1.0% in September, and private residential construction spending rose 0.5%. Within residential, single-family spending was up 0.1%, while multifamily grew 2.0%. Public construction spending dipped 0.9% in September.
- Although September's construction spending figure was 0.2% below September 2015, spending in the first nine months of 2016 was still 4.4% higher than the same period last year.
Dive Insight:
Although construction spending failed to meet economist expectations of a 0.5% gain in September, the Commerce Department's upward revision of the July and August results signals a brighter overall picture for spending.
The rise in residential construction contradicts the most recent housing starts report from the Commerce Department, which found that starts fell 9% in September, due largely to a steep dip in the multifamily sector. However, builders are reportedly optimistic that the single-family segment will continue to pick up steam and drive the residential industry going forward.
Once again, public sector spending declined in September. Industry groups have consistently called on government at all levels to boost public investment in infrastructure, but broad initiatives to fund large-scale projects are often stalled by political infighting or a lack of resources. However, industry groups hope that promises from both presidential candidates to boost infrastructure spending will spur growth in the public sector in the next few years.
Construction spending has remained stagnant since a spike in March. However, Dodge Data & Analytics Chief Economist Robert Murray said during the firm's Executive Outlook Conference last month that he isn't concerned about an impending slowdown in the industry. In fact, he predicts that starts will grow a slight 1% in 2016 and then jump 5% in 2017 as construction moves "into a more mature phase of expansion."
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