The decline in construction spending accelerated in January, increasing to -1.7% MoM, from a larger than originally reported decline of -1.3% MoM in December. The January drop in construction spending was the largest monthly decline in 14 years, and indicates the rising economic uncertainty and tightening credit conditions are further eroding investment demand for residential and non-residential buildings. Total construction spending has now fallen for four straight months.
The market had been looking for only a -0.7% drop in January. Residential construction losses rose to the highest in three months at -2.9% MoM, while non-residential construction spending has now dropped two months in a row, falling -0.8% MoM in January. This is a blow, as the non-residential spending growth had been offsetting a lot of the decline in residential spending over the past 2.5 years.
Over the past year, total construction spending has fallen -3.3% YoY, with residential investment dropping by -19.4% and non-residential spending rising by +12.4% YoY. On a three month annualized basis, residential spending declines continue to accelerate, running at over -26% annualized pace the past two months compared to half that pace last July at -12.6% annualized.
Both public and private spending fell last month, with private spending accounting for the brunt of the decline, falling -2.2% MoM and -6.4% YoY. Public spending fell -0.2% MoM, but shows a heartier gain of +6.6% YoY. This month's decline in public spending was due to a drop in road-building, while the drop in private non-residential construction was due to a slowdown in hotel, hospital, and powerplant investment.
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