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Economy in Brief

U.S. Construction Spending Surprises to Upside in September
by Sandy Batten  November 1, 2022

• Residential construction remained challenged by rising interest rates; nonresidential building rebounded.

• Public sector construction declined for second month.

The value of construction put in place unexpectedly rose 0.2% m/m (10.9% y/y) in September with a small upward revision to both (-0.6% m/m versus -0.7% initially) and a meaningful upward revision to July (+0.8% versus -0.6% initially). The Action Economics Forecast Survey had expected a 0.5% m/m decline in September. Residential construction was essentially unchanged in September (+12.6% y/y) following three consecutive monthly declines. Clearly, the Federal Reserve's aggressive tightening of policy is weighing on the residential housing market. By contrast, nonresidential construction rose 0.5% m/m (9.2% y/y), its third increase in the past four months.

Private construction rebounded in September, rising 0.4% m/m (11.9% y/y) but failed to regain the 0.7% m/m decline in August. Private residential construction was unchanged in September from August (+12.7% y/y) after having declined in each of the three previous months. Construction of single family homes fell 2.6% m/m in September, its fifth consecutive monthly decline while construction of multi-family homes increased 0.3%, the same monthly gain as in August.

Private nonresidential construction increased 1.0% m/m (+10.5% y/y) in September after having been essentially unchanged in August. The September increase was more than accounted for by a 7.6% m/m jump in manufacturing construction spending. Excluding manufacturing, the rest of private nonresidential construction fell 0.6% m/m in September after a 0.1% monthly decline in August.

The value of public construction declined 0.4% m/m (+7.1% y/y) in September, the same monthly decline as in August. Almost all of public construction is nonresidential. This fell 0.3% m/m in September, the same monthly decline as in August. Highways, Education and Transportation account for nearly two-thirds of total public nonresidential construction. Construction spending rose in each of these three key areas in September, rising a total of 0.6% m/m after a 0.6% m/m decline in August.

The construction spending figures, some of which date back to 1946, can be found in Haver's USECON database. The expectations reading is in the AS1REPNA database.

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