U.S. construction spending rises in October, residential investment to rebound in Q4

U.S. construction spending increased in October; however, it came in line with consensus expectations.  The construction spending rose 0.5 percent on a sequential basis, as compared with the market forecast of a rise of 0.5 percent.  The construction spending data for September was upwardly revised to 0 percent from -0.4 percent.

Private spending declined 0.2 percent sequentially, as compared with September’s print of a decline of 0.1 percent. This decline was mainly driven by a drop of 2.1 percent in non-residential spending. In September, non-residential spending had dropped 0.8 percent. Meanwhile, private residential investment was up 1.6 percent in sequential terms amidst strong growth in both single-family and multi-family residential construction.

This is consistent with the recent strong housing sector data. A rebound in private residential construction underpins the view that residential investment will recover in the fourth quarter, says Wells Fargo in a research report.

The total public construction in U.S. rose 2.8 percent in sequential terms, as compared with September’s rise of 0.4 percent. It recorded growth at both the state level and the federal level. Both non-residential and residential public construction spending rose sequentially in October. This is supportive of greater government investment in the fourth quarter, added Wells Fargo.

Barclays fourth quarter GDP tracking estimate is at 2.2 percent quarter-on-quarter. According to Barclays, the stronger data on state and local government construction spending than anticipated has stimulated its GDP tracker. But this was countered by weaker than anticipated outturns on private residential and nonresidential structures investment.

At 03:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -53.6205. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex