US Construction Spending: Longer-run trends show only a slight hint of improvement - Wells Fargo

Analysts at Wells Fargo point out that construction spending rose 0.3% in September but outlays for August were revised lower and now show a gain of just 0.1%, compared to the initially reported 0.5% rise.

Key Quotes: 

“Overall construction spending rose slightly more than expected in September but the larger gain was largely due to a downward revision to the prior month’s data. The monthly data are extremely volatile and the initially reported figures are often revised substantially. Moreover, deviations due to sampling error are typically much larger than the reported monthly change in the series.”

“The September data were likely impacted by the hurricanes, which disrupted building activity in Texas, Florida and some other parts of the South during August and September. Hurricane damages may have boosted public construction spending. Total public construction outlays rose 2.6 percent in September, with spending for power projects jumping 11.0 percent and outlays for conservation and development surging 12.6 percent. That latter category includes outlays for dams, levees and jetties.”

“Overall construction spending in the private sector fell 0.4 percent in September, with spending on nonresidential projects falling 0.8 percent and spending for residential construction unchanged. Oddly enough, spending for both single-family and multi-family construction rose modestly in September, climbing 0.2 percent and 0.6 percent, respectively.”

“Spending on home improvements tumbled 0.6 percent, however. We expect to see that drop reversed in coming months, as homes are repaired following the recent hurricanes.”