Economy Watch: Construction Spending Gains Ground in October

The first 10 months of 2016 have been pretty active for development, with construction spending up 4.5 percent from the same period last year.

A_closer_view_of_the_Infinity_(300_Spear_Street)_construction_site,_The Census Bureau reported late last week that U.S. construction spending was up during October by 0.5 percent compared with the September total. Year-over-year, construction spending in October was up by 3.4 percent. Also, during the first 10 months of this year, construction spending amounted to $972.2 billion, 4.5 percent above the same period in 2015.

Public construction spending accounted for the increase in October—unusually, since that sector has been contracting in recent years—gaining 2.8 percent compared to September. Spending on educational facilities was especially brisk, up 4.1 percent for the month, while highway construction gained 1.9 percent. Compared with last year, however, public construction spending as a whole was off 0.6 percent.

Spending on private construction was down 0.2 percent for the month in October, but up 4.7 percent for the year. In the private realm, growth in both residential and nonresidential construction has been strong since this time last year, increasing by 4.7 percent and 4.8 percent, respectively. In the residential sector, spending on multifamily properties grew 11.4 percent compared with last year and 2.8 percent compared with last month.

In the nonresidential sector, construction spending is still strong for office and hotel projects. Spending on office construction was down in October (2 percent) but up a sizable 28.4 percent compared with October 2015. Likewise, spending on hospitality projects edged down 2.1 percent for the month, but was up 28.4 percent for the year. Other growth sectors included industrial (up 6.1 percent for the year) and healthcare (up 2.2 percent for the year), but spending on manufacturing projects contracted 8.6 percent since last year, as the sector has been buffeted by the strength of the dollar and other macroeconomic trends.