by Arsene Aka, Senior Economist at Dodge Construction Network
According to the U.S. Commerce Department (Census Bureau), the total value of construction put in place rose 0.1% in September to a seasonally adjusted annual rate of $2.1 trillion, as spending on both residential and nonresidential construction projects increased by 0.2% and 0.1%, respectively. Economists had expected total construction spending to be unchanged in September.
In terms of private residential construction, new single-family construction outlays were up 0.4%, while spending on new multi-family construction dropped 0.1%. Meanwhile, spending on public residential construction rose by 2.3%. Despite the latest cut in the funds rate by the Federal Reserve, mortgage rates have remained stubbornly high, which does not bode well for residential construction. In addition, despite the recent increase in builder confidence, the National Association of Home Builders’ Housing Market Index remains below the 50-point threshold, indicating that building conditions will weaken over the next six months.
Meanwhile, the monthly increase in spending on nonresidential construction was mostly driven by higher outlays on educational, commercial, highway and street, and transportation construction projects. On the other hand, spending on power, health care and manufacturing construction fell between August and September. Despite the monthly decline, manufacturing construction saw a 21% year-over-year increase in spending.
During the first nine months of this year, construction spending stood at $1.6 trillion (unadjusted basis), up 7% from the amount posted during the same period in 2023. Residential construction outlays grew 7% during the first three quarters, to $710 billion, and nonresidential construction rose 8% to $911 billion. Even though construction spending in October might have been affected by Hurricanes Helene and Milton, Dodge Construction Network continues to expect robust growth in the total value of construction put in place during 2024-25. Continued easing in monetary policy by the Federal Reserve will help support construction spending and starts in the short term.
