The Census Bureau reported that manufacturing construction activity increased an annualized 1.3 percent in October. Manufacturing construction spending rose from $48.08 billion in September at the annual rate to $48.69 billion in October. Since January, we have seen modest gains in construction spending in the sector, up 2.9 percent, but there has also been a high degree of volatility.
Manufacturing construction dollars have ranged this year from a low of $43.34 billion in June to a high of $50.52 billion in August. Over a longer time horizon, one can easily see the rebound in the sector, with construction spending up 12.3 percent and 37.9 percent over the past 24 and 36 months, respectively.
Total construction spending increased 0.8 percent in October, improving upon the 0.3 percent decline in September. The higher number in October came mainly from the public sector, with construction funding by all levels of government jumping 3.9 percent for the month. It had fallen 1.9 percent in September. On a year-over-year basis, the largest increases in public construction spending have been for power (up 10.8 percent), water supply (up 10.2 percent), highway and street (up 9.2 percent), transportation (up 6.9 percent), and sewage and waste disposal (up 6.2 percent) projects.
In contrast, public dollars devoted to commercial (down 28.6 percent) and office (down 14.1 percent) spending projects have declined sharply over the past 12 months. Nonetheless, those two categories have seen improvements lately, up 3.5 percent and 8.8 percent, respectively, in October.
Private residential construction was off 0.5 percent in October, and it has generally struggled since June. Over the past four months, residential activity declined 2.4 percent. Much of that decline can be attributed to the “sticker shock” of higher mortgage rates, albeit at levels that are still historically low. On the bright side, however, the housing market continues to reflect its recent rebounding, with year-over-year increases in private residential construction of 17.8 percent.
Private nonresidential construction spending was also lower, down 0.5 percent in October. In addition to the increase in manufacturing activity, other sectors with higher construction spending for the month included educational institutions (up 6.6 percent), commercial (up 2.8 percent), and transportation (up 2.2 percent), among others. These were offset, though, by declining spending in the following sectors: communication (down 8.4 percent), power (down 5.7 percent), and amusement and recreation (down 2.3 percent).
Chad Moutray is the chief economist, National Association of Manufacturers.