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Economy in Brief

Warm-Weather Driven Jump in U.S. Construction Spending in January
by Gerald D. Cohen  March 2, 2020

• Construction spending hammered 1.8% higher in January.

• Unseasonably warm weather in January very likely played a role.

• Meaningful upward revisions to previous months should raise construction activity in Q4 GDP.

The value of construction put-in-place grew a greater-than-expected 1.8% in January (6.8% year-on-year). Both November and December were revised higher to 1.6% and 0.2% respectively from 0.7% and -0.2%. The Action Economics Forecast Survey had expected a 0.6% rise in January. U.S. population-weighted heating was 176 degree-days below normal. The only warmer January by this measure occurred in 2006.

Based on this data, the construction spending portion of fourth quarter GDP is likely to be revised higher. In the fourth quarter GDP report released last week private construction spending (nonresidential + residential) had a negligible impact, subtracting 0.02 percentage point from GDP growth.

Private construction jumped 1.5% (4.9% y/y) in January while public soared 2.6% (12.6% y/y). The gain in private construction was led by 2.1% growth in residential construction (9.0% y/y) with single family up 2.8% (9.6% y/y) while multifamily was unchanged on the month (-8.3% y/y).

Nonresidential construction grew 0.8% (0.5% y/y), with the four largest sectors -- power, commercial, manufacturing, and office all up in January. Nonresidential public construction, which makes up 98% of public construction, rose 2.6% in January (12.6% y/y), with healthy gains in school spending and road building.

The construction spending figures, some of which date back to 1946, as well as and US Population-Weighted Heating and Cooling Days can be found in Haver's USECON database. The expectations reading can be found in the AS1REPNA database.

Construction Put in Place (SA, %) Jan Dec Nov Jan Y/Y 2019 2018 2017
Total 1.8 0.2 1.6 6.8 -0.3 3.3 4.5
  Private 1.5 0.1 2.1 4.9 -2.5 3.2 6.0
    Residential 2.1 1.5 2.0 9.0 -4.7 2.8 12.4
    Nonresidential 0.8 -1.5 2.2 0.5 0.0 3.7 -0.7
  Public 2.6 0.6 0.4 12.6 7.1 3.6 -0.1
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