Construction spending throttles past expectations in November, led by residential building
The numbers: Construction spending rose 0.8% in November, to a seasonally adjusted annual rate of $ 1.26 trillion, the Commerce Department said Wednesday.
What happened: The monthly gain was led by the private sector, where spending was up 1.0%. Construction outlays in the public sector were up only 0.2% for the month. Overall spending was 2.4% higher than in November 2016, and spending for the year to date was 4.2% higher than the same period a year earlier.
September and October spending levels were revised up to a net 0.4% increase.
Big picture: Analysts surveyed by MarketWatch had forecast a 0.5% monthly increase in November. The stronger-than-expected reading may help boost GDP forecasts for the fourth quarter. But the yearly increase was the lowest since July.
In November, much of the gain was driven by residential building, which was 7.9% higher than a year ago. Construction of single-family homes was 8.9% higher. Outlays on transportation projects jumped 42% compared to a year ago, while spending on manufacturing was down more than 15% for the year.
Read: New-home sales roar to a fresh high as builders feed a market starved for supply
Market reaction: The Dow Jones Industrial Average DJIA, +0.22% was little changed after the data release. Analysts were also watching the ISM manufacturing gauge, which was released at the same time.
What they’re saying: “Overall, Q4 is headed for a 10% annualized increase in total construction spending, the best performance since Q1 2016,” said Ian Shepherdson, chief economist for Pantheon Macroeconomics.
Amherst Pierpont Securities’ Stephen Stanley agreed with that analysis, but noted one force working against overall stronger growth in the final quarter. “In contrast, business investment in structures may have been stagnant in Q4, reflecting two forces: 1) businesses were sitting on their hands to see what would happen with the tax bill and 2) the oil and gas rig count crested and actually came down modestly in Q4 after surging for much of the year.”