US Construction Spending Rises 11.3% YoY, Boosting Economic Momentum

Summary

  • Despite being below expectations, construction spending rose by 11.3% year-on-year in November, contributing to the recent stream of promising data on labor market, consumer spending, and economic confidence.
  • Spending on private construction expanded 0.7% in November, following a 1.2% increase in October. Residential construction investments advanced 1.1% after a 2.0% rise in the previous month.
  • Expenditure on new single-family construction spiked 2.9%, and with mortgage rates reducing further below 7%, the single-family homebuilding market could experience a surge in 2024.
  • Private non-residential construction spending (incl. factories) advanced 0.2% in November. Manufacturing construction expenditure increased 0.5%, backed by Biden administration’s efforts to restore semiconductor manufacturing in the US.
  • Spending on public construction projects dropped 0.7% after a 1.3% rise in October.

Construction Spending Surges

In November, construction spending rose by 11.3% on a year-on-year basis, despite not meeting expectations. This increase, along with recent data on the labor market, consumer spending, and economic confidence, suggests that the economy is back on track after a seeming hiccup at the fourth quarter’s outset.

Private Construction Rise

Private construction expenditure witnessed an uptick of 0.7% in November following a 1.2% rise in October. Investments in residential construction also saw a 1.1% increase after a 2.0% boost in October.

Single-family Construction Boom

There was a 2.9% leap in outlays on new single-family construction projects. The scarcity of previously owned homes in the market instigates new construction. With mortgage rates dropping below 7%, there might be a surge in single-family home building in 2024.

Multi-family Construction Growth

Expenditure on multi-family housing projects saw a marginal 0.1% rise in November. However, the momentum fades as there’s a considerable stock of multi-family housing under construction.

Non-residential Construction Spending

Expenditures on private non-residential structures like factories boosted 0.2% in November. Spending on manufacturing construction increased 0.5%, backed by the Biden administration’s push to bring semiconductor production back to the US.

Public Construction Outlays

Spending on public construction projects had a downslide of 0.7% after a 1.3% boost in October. State and local government outlays fell 0.5%, while spending on federal government projects dipped 3.1%.

Recognizing the influence of construction spending on the economy, these developments can impact forex trading indirectly as they are tied to the health of the overall economy. Traders need to assess these aspects to make informed decisions.

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