Construction spending rose +.3% MoM (consensus -.5%) in September after seeing August's original gain of +.2% MoM revised into a loss of -.2% MoM. Construction contracted in June, July, and August, so this was the first gain in four months. Residential continues to contract, declining -1.4% MoM and -16.4% YoY in September. Non-residential growth accelerated to +1.8% MoM in September, and rose +16.7% YoY. Essentially, non-residential construction has offset the slack in homebuilding over the past year. Homebuilding fell for the 19th straight month.
Public non-residential construction had the largest gain last month of +2.1% MoM (+15.8% YoY) followed closely by private non-residential at +1.5% MoM (+17.4% YoY). Federal spending actually fell 7.9% MoM in September, but is up 12.4% YoY, which is lagging the +16.3% YoY gain in state and local spending.
Net impact on third quarter GDP will be minimal due to prior month revisions lower.
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Chicago Purchasing Managers Index unexpectedly dropped into contractionary territory in October, falling to 49.7 from 54.2 in September. This is the lowest level the index has been since last February, when companies were working through their inventory overhangs. It appears that companies are growing increasingly reluctant to invest in capital equipment as concerns rise about a slowing economy. Slowing auto and housing demand have been an especially heavy blow on the midwest, which specializes in vehicle production, including construction and agricultural equipment. Manufacturing represents about 12% of the U.S. economy.
While the new orders and production gauges both fell, with production falling over 10 points to 46.9. Prices paid surged to 74.7 from 59 the prior month, presumably due to surging oil prices. Employment also fell below 50, indicating contraction.
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