Economy Watch: Most Kinds of Construction Seeing Healthy Gains
- Nov 03, 2015
The economy might be a little wobbly, but at least construction spending is still rising. The Census Bureau reported on Monday that U.S. construction spending during September came in at an annualized rate of $1.094 trillion, or 0.6 percent above the revised August rate. The September 2015 figure is also 14.1 percent above the September 2014 rate. Both private and public construction spending were up for the month: increases of 0.6 percent and 0.7 percent, respectively. For the year, private construction spending was up 16 percent and public spending rose 9.4 percent.
Most categories of construction spending have increased since last year. With multifamily leading the way, and some single-family as well, residential construction spending increased 17.2 percent in September year-over-year and 1.8 percent month-over-month. Whatever else the economy is doing, residential developers are responding to the demand for apartments in a lot of markets nationwide. According to Marcus & Millichap, the number of new units delivered nationwide in 2014 totaled 238,000, marking a 14-year high, and the completions were met by a surge in pent-up demand for 270,000 units. The company estimates that 210,000 units will come on line by the end of this year, which might actually surpass demand somewhat.
In the nonresidential sector, the biggest increase in construction spending over the year was to build manufacturing space: up 41.3 percent, though spending took a tiny dip for the month, 0.4 percent. Even so, the increase points to demand for U.S. manufactured goods either from domestic buyers or on overseas markets—though the latter has slowed down because of the strength of the U.S. dollar against most major currencies. Construction in the power segment, which according to Census Bureau reckoning includes facilities for the extraction of oil and gas, eked out a 1.9 percent gain for the year, but lost 1.7 percent for the month, so the energy slump is taking its toll.
Most other kinds of nonresidential construction are increasing by much more healthy rates. Year-over-year spending on lodging—one of the hottest property types as the industry sets occupancy records—was up 32.8 percent in September. Office construction spending increased 19.3 percent; amusement and recreation was up by 30.6 percent; and educational properties was up by 11.5 percent.