Rise in Residential Enough to Offset Nonresidential Drag
Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Residential Outlays Boost Total Spending
Total construction spending rose 0.4% during October. The monthly gain was the result of a broad-based upturn in the residential category. Single-family, multifamily and home improvement outlays all picked up solidly during October, reflecting lower interest rates and hopes for easier monetary policy moving forward. Meanwhile, total nonresidential spending pulled back during October. Although some pockets continued to demonstrate resilience, notably for data center, manufacturing and power projects, the lagged effects of high financing costs and reduced credit access are still weighing on overall nonresidential spending.
Residential Construction Lifts Overall Spending
- Construction spending rose 0.4% in October, largely driven by a 1.5% pickup in residential outlays. Within private spending, single-family outlays increased 0.8% and multifamily spending ticked 0.2% higher.
- A trend rise in home improvement spending has driven much of the overall gain in residential outlays in recent months. Spending on home improvement projects picked up 2.7% in October, responsible for 75% of the overall upswing in private residential spending over the month. Zooming out, home improvement spending has climbed 14% since January.
- Single-family building also remains a source of strength. Private single-family construction spending has increased for two months in a row on the heels of a trend rise in single-family permits and a 21% jump in construction starts from July to September.