Economic News Blog
Posted by: Steven Kline, Jr. 5. December 2016

Construction Spending Grows Faster in October

(Neutral) The real value of construction put in place in October 2016 was $106,301 million. Compared with one year ago, this was an increase of 2.6 percent, which was slightly faster than September's 1.9 percent rate of growth. This was the first time the 1/12 rate of growth accelerated since February. However, the annual rate of growth continued to decelerate. It was 9.5 percent in October, which was the slowest rate of growth since May 2014. We are still a number of months away from the annual rate of growth accelerating.

Residential construction spending grew faster in October as well. The 1/12 rate of change accelerated to 3.4 percent from 2.8 percent in September. However, the annual rate of growth, now 11.3 percent, decelerated to its slowest rate since December 2012.

The above is negative for products, parts, and production of equipment used in the construction industry. However, the change in the real 10-year treasury rate has been moving lower since the end of 2015. Also, the change has been negative, meaning the rate has been lower than it was one year ago since May. And, the change in the rate is the most negative since mid 2012, which means that the real interest rate is falling at its fastest rate since mid 2012. This should help stem the tide in the slower growth in construction spending and may even cause construction spending to grow faster in 2017.

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