Construction spending chalked up gains in October

December 1, 2023

Spending on construction activity grew 0.6% in October, surpassing expectations, after September spending was revised higher. Spending jumped 10.7% compared to a year ago. The data are not adjusted for inflation.

The producer price index (PPI) for inputs to construction industries is down 0.3% compared to last year; the largest drop in prices came from the energy sector. Supply chain issues have for the most part been resolved; however, electrical components remain in short supply and are showing price increases. Investment in generative artificial intelligence (GenAI) is providing a boost to data center demand, which will keep prices for necessary construction materials higher.

Private residential construction popped 1.2% in October. The strength came from single-family home construction, which has been ramping up in the face of short housing supply in the resale market. Multifamily construction spending fell in the month. About a million apartments are slated to come on line this year and next. Building permits for single-family homes signal that more activity is expected next year, while applications for permits to build multifamily units have been declining.

Private nonresidential construction eked out a 0.1% gain in October on stronger power and manufacturing infrastructure construction. Federal infrastructure investment incentives are fueling a boom in private spending; however, labor remains in short supply as builders compete for workers across all types of projects. Manufacturing construction spending is 71.6% higher than a year ago and 221% higher since November 2021, when the Infrastructure Investment and Jobs Act was passed; computer and electronic manufacturing construction is up 534% over that same period.

Public construction spending rose 0.2% in October; most of the spending occurs at the state and local levels, which was flat on the month. Federal spending jumped 2.2% in the month. Power, transportation, sewage and conservation projects saw large spending increases.