According to the Census Bureau, private residential construction spending increased 2% during November. While the initial estimate for October was revised lower to 2.3% (from 3.4%) this was offset by an increase in the September reading from 0.6% to 1.5%. Private residential construction spending has risen in each of the last four months. On a year-over-year basis, outlays have increased 3.4%—the largest percentage point increase since June 2010. Nonetheless, from a longer-term perspective, the non-seasonally adjusted data reveal the extent to which the residential construction sector is still struggling as spending has declined 1.4% year-to-date in November.
The new single-family component of construction spending increased for the sixth consecutive month during November, notching a 1.5% month-over-month increase. On a year-over-year basis, this category jumped is up 2.5%. The new single-family housing market continues to face such roadblocks as tight lending standards, sluggish job growth and heavy competition for buyers from distressed properties. However, the recent improvement in new single-family construction spending is consistent with other indicators such as the gain in new single-family home sales and rising homebuilder sentiment. In addition, the upward trend in building permits for new single-family homes points to more gains in spending activity over the near term.
Spending on new multifamily housing increased 1.3% on a month-to-month basis in November, partially offsetting the declines registered in the prior two months. On a year-over-year basis, however, the recovery in multifamily construction activity becomes more apparent as spending is up 4.1% compared to November 2010. Going forward, we anticipate more healthy increases in multifamily construction spending due to the strong gains in starts and permits for new multifamily projects.
Once again, home improvement spending was a major driver of total residential spending activity, as this category increased rose 2.6% relative to October and is 4.1% above its year-ago level. While the home remodeling market has been volatile over the past three years, it has not been able to sustain any significant growth. Nonetheless, thanks to a combination of tax credits that have provided incentives for existing homeowners to install energy efficiency upgrades, and buyers making repairs to distressed properties, it did not suffer the same level of decline as the new home market.
Private nonresidential construction spending was essentially unchanged during November 2011, but the initial estimate for October was revised appreciably lower and now shows a 1.8% decline (vs. a preliminary reading of +1.3%). Strong spending growth by electrical utilities has also provided a significant boost to overall private nonresidential construction activity. While commercial buildings and manufacturing facilities have seen nominal spending levels rise over the past year, both categories registered declines on a month-to-month basis. Public-sector spending on construction projects jumped 1.7% in November, with highway and street projects and municipal power plants accounting for most of the increase.