Construction Spending: Nonresidential Drove Gains

Bottom Line:   The New Year's U.S. economic data releases started with one of the more lagged and revised series, construction spending --  but the report offered encouraging signs, at least for 4th Quarter growth. Residential spending declined again and remained in a sharp downtrend through November. However, manufacturing-related construction projects rebounded sharply and were annualizing at 75+% gains as investments in new plants grew with onshoring and heavy investment in new technologies related to electric vehicles. While residential was declining at an alarming pace of 15.5% annualized in the six months ending in November, nonresidential construction was running at 22+% annualized gains. Overall, investments in new manufacturing facilities will help relieve the blow of sharply slower residential spending. However, the volatility in nonresidential construction will likely still mean that net construction activity remains a drag on U.S. economic growth, at least through the first half, as the trend in residential construction looks unlikely to turn anytime soon.