U.S. Construction Spending Breaks Highest Record in 4 Years

Association of Construction & Development
December 6, 2013 — 1,422 views  

Construction spending saw an increase in October this year, which is also being recorded to be the fastest pace at which the spending has boosted in last four years. On the other hand, spending on commercial projects as well as home construction saw a dip.

A Look at the Bright Side

There was a growth of around 0.8% in the overall construction spending in October with an annual rate of around $908 billion. This reflects a much better position compared to the spending of September when it fell down to 0.3 percent. Spending on local and state government also saw an increase. This report was given by the Labor Department recently.

The growth pace that the spending recorded in October is being said to be the best since May 2009. It was also driven by an estimated 4 percent surge in the area of public spending.10.9 percent was the increase in federal spending. What needs to be noted here is that the partial government shutdown of 16 days did not seem to have much impact on any of the public projects.

Concerns

However, the month was not free from any sort of troubling signs as home construction saw a decrease of 0.6 percent. The rate is said to have dipped due to a fall in single-family homes. But it should be considered that home construction spending has seen a rise of approximately 18 percent over the last 12 months which is also the fastest pace year-over-year since 2008. The recent escalation in permits for building apartments is an indication that this will continue.

Hopes for Future

Joseph Lavorgna, who is the chief U.S. economist for the Deutsche Bank, said that single-family houses spending should bounce back given the plans by homebuilders for ramping up the construction. Lavorgna also feels that this recent dip should be expected to reverse soon as many ongoing improvements in the area of permits for new constructions will prove to be helpful.

Single-family houses roughly form around two-thirds of the market that looks into residential construction. The pace at which homebuilding is moving has bounced back from some serious recessional crisis. But the single-family home sales of the new house have grown at a much slower rate. In addition to that, higher mortgage rates can lead to further slowdown. Though new homes only reflect a fraction of the market, they still have considerable economic impact.

Association of Construction & Development