Construction Spending Falls Unexpectedly

U.S. construction spending experienced the largest decline in three months, raising unexpected concerns among market watchers in the industry, the U.S. Census Bureau of the Department of Commerce announced Friday.

According to the Bureau’s report, construction spending was estimated at a seasonally adjusted annual rate of $1,144.0 billion for February 2016, down 0.5 percent from January. Spending in January rose 2.1 percent to a revised estimate of $1,150.1 billion.

However, on the positive side, February’s estimated figure is 10.3 percent above last February’s estimate of $1,037.5 billion. During the first 2 months of this year, the Bureau reported that construction spending amounted to $157.1 billion, 11.2 percent above the $141.3 billion for the same period in 2015.

Private construction dollars fell 0.1 percent from $847.2 billion in January to a seasonally adjusted annual rate of $846.2 billion in February, according to the data. Residential construction rose 0.9 percent from $443.8 billion to a seasonally adjusted annual rate of $447.9 billion in February, the highest rate since November 2007.

Single-family spending in the private residential sector stood at $235 billion, up by 1.2 percent from last January estimate and 10.6 percent higher annually, according to the data.

Meanwhile, nonresidential construction was at a seasonally adjusted annual rate of $398.3 billion in February, 1.3 percent below the revised January estimate of $403.4 billion.

“The pace of total nonresidential construction spending retreated from a huge increase in the January estimate,” said Na Zhao, Ph.D., Housing Policy Economist at the National Association of Home Builders. “It slipped down 1.4 percent on a monthly basis, but was 10 percent higher than the February 2015 estimate. The largest contribution to this year-over-year nonresidential spending gain was made by the class of lodging (30 percent increase), followed by office (40 percent increase) and highway and street (25 percent increase).”

The report also noted that public construction spending was $297.8 billion, 1.7 percent below the revised January estimate of $302.8 billion.