Residential Gains Strength while Nonresidential Plateaus
- Overall construction spending rose 0.4% during November. Data for the prior two months were revised higher, including a massive 1.1-percentage point upward revision to September’s data. Total spending is now up 9.3% on a year-over-year basis.
- Construction activity continues to improve, despite continuing shortages of building materials and labor.
- Supply constraints continue to wreak havoc on project timelines and are adding to the rising cost environment. For example, the Producer Price Index (PPI) for construction materials and components jumped 1.5% during November.
- There are some signs material and worker shortages are beginning to ease as the industry enters into the seasonal slowdown during the winter months. The rise of the Omicron variant, however, may further disrupt global supply chain networks and exasperate labor scarcities, creating some downside risk. Flooding in Western Canada has also wreaked havoc on the lumber market.
- Residential spending increased 0.9% during the month. Home building appears to be strengthening against a backdrop of strong buyer demand and a shortfall of existing homes for sale.