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Construction spending rose 1.0% m/m in October (previous: 0.6%), stronger than forecast (0.6%) and consensus expectations (0.6%). Much of this unexpected strength in October was driven by the private residential sector, with both single-family and multi-family construction posting solid October gains. Private single-family residential construction grew 1.6% m/m (previous: 1.3%), while multi-family building rose 1.4% (previous: 5.8%). Together, total private residential spending was up 1.0%, suggesting better Q4 residential investment growth than we had previously expected.
On the private nonresidential side of the report, spending rose 0.6% in October (previous: 0.2%) driven by gains in educational, communication and manufacturing construction. Public sector activity (1.4% m/m, previous: -0.1%) also outperformed our expectations in October, as a 19.2% m/m surge in federal construction provided a large boost. Taken together, the October construction spending report keeps the outlook for construction activity broadly unchanged. Activity and investment in the housing sector continues to improve at a moderate rate, while business sector construction growth is modest.
"Stronger-than-expected residential construction spending boosted our estimate of residential investment growth for Q4. Offsetting this, private nonresidential construction spending was a bit below our expectation in October and trimmed our estimate of structures investment. On net, our Q3 and Q4 GDP tracking estimates were both unchanged at 2.0%", says Barclays.
