Construction Spending Reports False Gains in October

Construction spending was up in October, gaining 0.8% from September, to reach a seasonally adjusted annual rate of $798.5 billion, according to data released today by the U.S. Census Bureau. October’s figure was down 0.4% year-over-year.

The monthly gain was ill-got, however, as it stemmed from residential improvements—a category so badly estimated that the Census Bureau does not itemize it on its monthly reports. Once those estimates are subtracted, construction spending overall was down 0.1%.

The report’s only real bright spot came from the private sector’s nonresidential side, which rose 1.3% for the month, thanks largely to a 5.8% monthly gain in the power industry. The private nonresidential construction industry as a whole was up 8.4% on a yearly basis, with strong annual numbers from several sectors, including commercial (up 11.9%), educational (up 14.0%), amusement and recreation (up 16.6%), transportation (up 10.8%), power (up 18.2%), and manufacturing (up 13.9%).

While the report cited a 3.4% improvement for private residential construction to an estimated annual rate of $239.0 billion, that number relies heavily on the unreliable estimates for residential improvements. With improvements subtracted, the sector shows only a 0.4% improvement, thanks to a 0.6% gain from single-family construction. Private multifamily projects were down 0.8%.

Public construction spending was down for both residential and nonresidential projects, dropping 2.0% and 1.8%, respectively.

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