Construction spending saw a substantial increase in October, advancing on solid gains in homebuilding outlays.
In a report on Tuesday, the Commerce Department estimated construction spending throughout the month at a seasonally adjusted annual rate of $971 billion, an increase of 1.1 percent over September's revised estimate of $960.3 billion.
Compared to a year ago, October's rate of spending was up 3.3 percent.
A large share of October's increase came in spending on residential projects, which was up 1.3 percent from September to an adjusted yearly rate of $359.1 billion. In the private sector, spending on home construction climbed 1.3 percent, rising for both single-family (1.3 percent) and multifamily (1.8 percent) projects to come to a total rate of $353.8 billion.
Despite the promising gain, economists Patrick Newport and Stephanie Karol at IHS Global Insight called October's residential construction numbers "deceptively strong."
"The figure for single-family construction depends on that month's average single-family home price," the pair said in a note to clients. "That number launched itself into outer space in October ... While this will make fourth-quarter construction spending figures shine, we believe this is an anomaly caused by sampling issues, rather than true, sustainable strength."
Meanwhile, spending on public residential construction dropped 2.2 percent month-over-month, declining to an annual adjusted rate of $5.3 billion. That dip was offset by gains across nearly all categories of nonresidential construction, led by double-digit increases in commercial and public safety projects.