Modest Residential Gain Offsets Small Nonresidential Decline
Source: Economics Group of Wells Fargo Bank, N.A.
Summary
Elevated Rates Continue to Constrain ConstructionTotal construction spending was essentially unchanged in November as a modest gain in residential outlays helped offset a small decline in nonresidential spending. The residential rise was driven by growth in single-family and home improvement outlays, reflecting home builders’ ability to offer incentives to shore up demand and low supply in the existing home market. Although data center, power and highway & street outperformed, most other nonresidential segments weakened during the month. All told, total construction spending continues to moderate as elevated interest rates and tight credit conditions weigh on activity.
Single-Family and Home Improvement Outlays Lift Residential Construction
- Residential construction outlays edged 0.1% higher in November 2024, offsetting the 0.1% drop in nonresidential construction spending. Although the improvement was modest, residential construction as of last November has gained in three of the last four months.
- An upshift in single-family starts at the tail end of last year has kept single-family construction outlays robust. Single-family permits improved in both October and November 2024 and were up nearly 4% since last June.