Construction spending slows in March

Summary

Construction spending stalls in the first quarter

Total construction spending declined 0.2% in March, the second drop in three months. Overall construction spending has gotten off to a slow start in 2024 with monthly readings of -0.6%, 0.0% and -0.2% in the first quarter. Residential spending weakened in March with pullbacks across both single-family and multifamily segments. Nonresidential spending eked out a 0.2% gain, fueled by spending on the public side, particularly for infrastructure projects. Private nonresidential spending fell for a third straight month as developers remain constrained by higher interest rates and tighter lending standards. A downdraft in new project starts for these types of construction and a pullback in architecture firm billings suggests a drop in private nonresidential activity is ahead in the near-term.

Residential spending falls across the board

• Total construction spending fell 0.2% in March as weaker residential and private nonresidential spending weighed on headline growth.
• Construction spending has had a slow start to 2024, declining in two of the first three months of the year. March could have marked a third consecutive monthly decline, but February's data were revised upward from an initial 0.3% decline to a flat 0.0% reading.
• Residential spending fell 0.7% in March as single-family, multifamily and home improvement spending all moved lower during the month. Single-family construction has been the primary driver of residential spending growth as of late and now accounts for half of all private residential outlays.
• Despite the March slowdown, we still expect single-family construction to gradually improve over the course of this year, with a structural shortage in housing supply and sturdy economic growth as tailwinds.
• Multifamily outlays continued to weaken, falling for a third consecutive month in March. Rising apartment vacancies and fears of oversupply have impelled developers to pull back on new projects, as evidenced by the downdraft in multifamily permits and starts over the past year.

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