Ahead of the Bell: US construction spending

US construction spending expected rise in November

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 November U.S. construction spending at 10 a.m. Eastern on Friday.

HIGHER SPENDING: Economists expect that construction spending rose 0.3 percent in November, according to a survey by data firm FactSet. That would build on a 1.1 percent surge in October.

LIMITED GROWTH: Construction activity has barely improved over much of 2014, hampered by limited gains in homebuilding. Few potential buyers can afford new homes, a reflection of meager wage growth, tight credit standards and builders focused on pricier housing developments that are beyond the financial reach of most home-seekers.

Over the 12 months that ended in October, private residential construction spending rose just 1.9 percent to a rate of $353.8 billion. That lags behind total construction spending, which has climbed 3.3 percent from a year ago to $971 billion.

Sales of new homes dropped 1.6 percent in November to a seasonally adjusted annual rate of 438,000, the Commerce Department said in a recent report. That second straight monthly decline leaves home construction significantly below the annual rate of 700,000 that was common in the 1990s.

Still, broader economic growth should help to bolster construction. Employers have added 2.65 million jobs through the first 11 months of 2014, the most in 15 years. Each new paycheck helps to increase consumer spending, even though average wages have yet to meaningfully outpace inflation. The job gains have accompanied faster economic growth during the second and third quarters of 2014.

Architectural firms have reported increased demand for the past seven months, a sign that construction spending could accelerate in 2015.

The American Institute of Architects reported that its November billings index was 50.9 in November. While that's down from 53.7 in October, any score above 50 signals increased activity. Demand for apartment and condominium complexes has contributed to the increase, while more than five years after the Great Recession ended, local and state governments are restarting delayed building projects.

View Comments (31)