Ahead of the Bell: US construction spending

US construction spending likely rose in October

Associated Press
US construction spending down 0.8 percent
.

View photo

In this photo made on Monday, Sept. 22, 2014, work continues at a construction site in Pittsburgh. The Commerce Department releases construction spending for August on Wednesday, Oct. 1, 2014. (AP Photo/Keith Srakocic)

WASHINGTON (AP) -- The Commerce Department reports on U.S. construction spending in October. The report will be issued Tuesday at 10 a.m. Eastern.

SALES REBOUND: Economists expect that construction spending rose 0.6 percent in October, according to a survey by data firm FactSet. That would reverse two consecutive months of declines. Construction spending fell 0.4 percent in September and 0.5 percent in August.

Building activity has been slowly improving for much of 2014, although its contribution to broader economic growth has been relatively modest. Homebuilding has increased very slowly, limited by meager wage gains that have barely outpaced inflation. That has cut into the amount of money that people have to spend on homes or rent.

Total construction spending has risen just 2.9 percent over the past 12 months ended in September. Spending on hospitals and health care facilities slid during that period, with the losses being offset by increased office and commercial construction.

Home construction has ticked up a mere 0.7 percent. New-home sales have risen only 1 percent, according to a separate Commerce Department report. Builders are largely targeting wealthier buyers which can boost profits but often means less construction to fuel economic growth. The median price of a new home has risen 15.4 percent in the past 12 months to $305,000, a pace that's more than double the average annual price increase for sales of existing homes tracked by the National Association of Realtors.

Still, builders are hiring at a slightly faster clip than last year. Construction companies are adding an average of 14,000 workers a month so far this year, compared with a monthly average of 11,083 in 2013. The challenge is that stronger hiring and economic growth during 2014 has yet to translate into the wage growth that could further propel construction spending and hiring.

Architectural firms are reporting greater demand for their services, however, a sign that construction spending should improve in the months ahead.

The American Institute of Architects said that its October billings index was 53.7. Any score above 50 indicates that billings increased. A breakdown of the index suggests that municipal governments and non-profits are spending more on architectural designs, after having kept their spending in check during the more than five-year recovery from the Great Recession.

View Comments (31)