Nationwide spending on construction rose to the highest number seen in 8-½ years in March. According to the Commerce Department, U.S. construction jumped 0.3% to the highest level seen since October 2007. This rise followed an upwardly revised 1.0% increase in February. The revision signals sustained strength in the sector in spite of a sharp drop-off in spending by energy firms.
After the previously reported 0.5% decline in construction spending in February, a recent Reuters poll of economists forecasted a construction spending increase of 0.5% in March. Compared to a year ago, March construction expenditure was up 8.0%. Although February’s outlays were later revised higher, spending in January was revised down from a 2.1% increase to 0.3% drop.
The annualized rate of economic growth was limited to a mere 0.5% in the first quarter, due in part to a decline in nonresidential construction investment. Much of the plunge in nonresidential construction spending is attributed to harsh spending cuts within the energy sector, still reeling from 2015’s plunge in oil prices.
March’s figures were buoyed by a 1.1% swell in private construction spending, reaching its highest level since October 2007. Private residential spending saw 1.6% growth, while private nonresidential spending, including offices and factories, jumped 0.7%. The private nonresidential amount equals the highest seen since October 2008.
Meanwhile, public construction spending dipped 1.9% in March. Local and state government construction projects, the largest segment of the public sector, dropped 1.4%. Federal spending tumbled 7.4% in March.
Recent information from the National Association of Home Builders also points to an increase in residential construction. The annual rate of total U.S. housing starts in February 2016 was up to 1,178,000, from 1,120,000 in January. Housing starts are privately owned housing units on which construction has started within a given period. They are divided into three categories: single-family houses, townhouses or small condos, and apartment buildings with five or more units. Single-family housing starts also increased in February, up to 822,000 from 767,000 in January.
Single-family housing has seen a gradual, but steady increase in the seasonally adjusted annual rate of housing starts over the past year. In February 2015, the figure sat at 600,000. A year later, that number is 822,000, marking a jump of 37%.
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