Construction spending picks up in October
|Summary
Residential boosts overall outlays as nonresidential slows
Total construction spending advanced solidly during October. The 0.6% gain in overall outlays was driven by a 1.2% rise in residential spending. Despite higher mortgage rates, lean resale inventory and incentives such as rate buy-downs and price discounts have boosted sales and encouraged builders to move forward with new single-family projects. Spending on multifamily development, which dipped modestly in October, is being supported by the substantial amount of apartment and condo construction underway. A sharp pullback in new multifamily starts alongside deteriorating apartment market fundamentals and reduced credit access should bring a weaker pace of multifamily outlays in the months ahead.
Meanwhile, nonresidential spending inched up 0.1% during the month. On balance, nonresidential spending appears to be shifting into a lower gear, notably for commercial construction. In addition to knock-on effects of the pandemic, elevated financing costs, more restrictive lending and heightened economic uncertainty look to be weighing on office, retail and warehouse construction. By contrast, spending on manufacturing, education and infrastructure projects continues to strengthen alongside supply chain relocation, demographic shifts and the implementation of government spending programs.
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