National Construction Spending Up On Strength In the Residential Market

Construction activity is up nationwide, but it's mostly concentrated in the residential market. Here are the highlights:

• U.S. Census Bureau of the Department of Commerce announced that construction spending in December 2013 is up 5.3% over December 2012 ($930.5 billion up from $883.6 billion). The December 2013 spending number was 0.1% above the November 2013 value.
• Increases in private construction were paced by residential construction. Private construction was up 1% from November 2013 to December 2013 ($663.9 billion to $657.1 billion).  The residential gain was 2.6% ($352.6 billion in December 2013 from $343.8 billion in November 2013). Residential is up ~17% year-over-year. Nonresidential lost 0.7% ($311.3 billion in December 2013 down from $313.4 billion in November 2013) but is up ~2% year-over-year.
• Public construction was down 2.3% in December 2013 from November 2013 ($266.6 billion from $272.8 billion). It's down 5% year-over-year.

Private residential construction tends to be a leading indicator while private nonresidential tends to lag the economy. If this continues to hold, then the current data may provide clues that 2014 will be a better year for the construction industry.

Public construction is off it's recent lows, but it has been on a downward trajectory for four years.

Multifamily housing has been particularly strong. According to CoreLogic:

"..the strongest multifamily markets have been driven by traditional fundamentals. Panelists at the [National Multifamily Council’s Apartment Strategies] conference singled out San Francisco, San Jose, Calif., Denver, Austin, Texas, Seattle, Wash., Dallas, Texas and Houston, Texas as the most currently robust multifamily markets. Combined, these markets have an employment base growing by 2.6 percent, a full percentage point faster than the U.S. rate – a very wide gap. Moreover, these markets also have strong demographic growth, driven in part by the job market, especially in technology and oil, which has attracted in-migration from other states and internationally. The conference consensus was that the current multifamily cycle will outlast prior average cycles given that the multifamily market under-built during the boom in the mid-2000s, but still had large declines during the bust.

For more analysis, check out this recent Calculated Risk post and associated graphs: