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Construction Spending: Another Rebound Bodes Well for 4Q Growth

January 3, 2017

Bottom Line: Construction rose modestly in November, with gains in residential, office and school construction. While the closing months of 2016 are now showing a considerable rebound in construction activity, 2016 will still be sharply below the growth in construction seen in 2015 and 2014. Private construction grew at at annual rate of 4.6% over the last twelve months versus 10.8% in 2015. Public construction is modestly slower than in 2015, 2.6% over the last twelve months versus 3.1% in 2015. Given the incoming federal administration's likely focus on infrastructure, it is notable that construction on highways and streets, about 8% of all construction, grew at a 10.5% annualized pace in the last twelve months, stronger than 2015's 8.4% pace and 2014's 5.3% pace.

Construction Spending ROSE by 0.9% in November, compared with market expectations for an increase of 0.5%. The October estimate was revised slightly higher from 0.5% to 0.6%, while the September, estimate was revised modestly lower from 0.0% to -0.2%. Construction spending is now 4.1% ABOVE its year ago level but still 1.9% below its March 2006 peak.

Residential Construction ROSE by 1.0%, Homebuilding is now 3.0% ABOVE its year ago level.

Nonresidential Construction ROSE by 0.9%. Nonresidential construction growth is now 6.4% ABOVE its year ago level.

Public Construction ROSE by 0.8%, and is now 2.6% ABOVE its year ago level.

Article by Contingent Macro Advisors