Nominal level of US construction spending nears prerecession peak

The nominal value of US construction spending grew 0.3% in March to seasonally adjusted annual rate of USD 1,137.5 billion from February’s upwardly-revised estimate of USD 1,133.6 billion. According to January’s revised reading, nominal value of construction fell 0.3% as compared with the initial estimate of a rise of 2.1%. Overall spending on construction grew 8% y/y due to strong private consumption spending and public non-residential. Public residential spending dropped 0.4% in March, its fifth consecutive fall.

In the residential component, outlays rose throughout the board. Single-family outlays that included over half of overall residential spending remained unchanged in March, whereas multifamily outlays were up 5.6%. The sector continues to be strong in spite of a slow rise in the rate of apartment vacancy as renting continues to be the most favoured option for several consumers, according to Wells Fargo.

Apartment fundamentals are likely to continue growing in the following months. Moreover, the amount of pent-up demand from young adults staying at home is likely to be huge, implying that there is still room for growth in this sector, added Wells Fargo. Private non-residential outlays grew 0.5% in March after declining for three straight months.

The overall nominal value of construction spending is approaching its pre-recession peak, said Wells Fargo. Private non-residential spending is expected to keep growing broad-based in the following months, in line with labor market rebound. Private non-residential is likely to grow in 2016, added Wells Fargo.