US: Residential construction to contribute solidly to Q4 GDP growth – Nomura
|US construction spending rose a solid 0.8% m-o-m in November, while revisions to October and September data were somewhat mixed (October revised down 0.5pp to +0.9%, September revised up 1.0pp to +1.3%), notes the research team at Nomura.
Key Quotes
“Incoming data point to a solid boost to Q4 real GDP growth from private construction activity, particularly from residential fixed investment.”
“Private residential construction outlays increased robustly by 1.0% m-o-m in November, following a 0.3% gain in October. This increase was driven by a strong 1.9% rise in single-family housing construction, following a decent 0.6% gain. Strong rises in recent months appear consistent with the recent rebound in homebuilding activity following major hurricanes in the South. Multifamily construction, by contrast, fell 1.3% m-o-m, which was the third consecutive monthly decline. Weaker spending on multifamily housing construction appears consistent with excess supply of apartments relative to demand.”
“Private non-residential construction spending rebounded 0.9% m-o-m, following a 0.2% decline in the previous month. On a year-over-year basis, however, private nonresidential construction remained weak, down 6.9% in November. This appears consistent with tighter lending standards on commercial real estate loans in 2017. We expect real investment in business structure to contribute only modestly to Q4 real GDP growth.”
“Government construction outlays rose a modest 0.2% m-o-m after much bigger gains in the previous three months. State and local government construction increased 0.7%, but it was offset partly by a 4.8% drop in federal government construction.”
“GDP tracking update: Private construction spending for residential and non-residential structures in November was stronger than expected. Moreover, state and local government construction activity was also above expectations. Altogether, we raised our Q4 real GDP tracking estimate 0.1pp to 2.6% q-o-q saar.”
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