Construction spending in the United States totaled $85.8 billion in March according to data recently released by the Census Bureau.
This was the total spent in the month for all types of construction — public, private, residential, nonresidential, buildings, infrastructure — everything. The March figure represented a solid gain of 8 percent when compared with the same month last year. During the first three months of this year, total construction spending amounted to just over $240 billion, which was a tidy 9.1 percent above the same period in 2015.
Nobody is going to complain about a quarterly gain of 9 percent, but this is actually a modest deceleration in the recent trend, as total spending increased by almost 11 percent in 2015. So if you are one of those manufacturers mired in a world where end-market growth of 2 percent looks pretty strong right about now, and you are wondering what sectors are driving economic growth in the United States, now you know one of them. It's the construction sector.
Total spending on residential projects expanded by 7.5 percent in the first quarter when compared with last year. This category includes money for new houses and also spending for repairs and renovations to existing structures. The fastest growing segment of the residential market is investment in new multi-family structures. Through the first quarter of 2016, spending in this category is up 31 percent when compared with last year. Spending for new single-family units is up a robust 11 percent in the first quarter, so this segment is also faring pretty well this year. But the growth in multi-family is significant, and processors who supply the construction markets should take notice.
Home ownership rates have drifted downward in recent years to historically low levels, while occupancy rates for rental units have steadily risen and are now at historically high levels. Economists, market analysts and other so-called experts noticed these two trends a while ago, and most of them predicted that the data would begin to revert back to historic norms as the economy strengthened and household incomes started to rise. But that hasn't happened yet, and I am increasingly of the opinion that for the new generation of households, owning a large home in the suburbs is not as important to the American Dream as it once was.