US: Colder weather dampened construction activity significantly – Nomura

Analysts at Nomura explain that the US March construction spending report indicates that while investment in structures in Q1 was likely, in part, boosted by a residual impact from a spurt of construction activity following major hurricanes in Q4, colder-than-usual weather in March dampened the activity significantly, limiting the growth in construction spending in Q1.

Key Quotes

“Total construction spending was down 1.7% m-o-m in March, but the spending in February and January was revised up strongly. Private spending on residential construction fell 3.5% and that on nonresidential construction declined 0.4% m-o-m. While colder-than-usual weather in March likely curtailed construction outlays, we think underlying momentum remains steady. Altogether, private sector construction outlays rose solidly by 13.7% q-o-q saar in Q1, following a sturdy 10.2% increase in Q4. Looking ahead, we expect a firm increase in private spending on nonresidential structure in Q2, while residential investment may slow somewhat owing to structural factors.”

“GDP tracking update: The upward revisions to private construction spending in January and February were notable, but the decline in March was sharper than we expected. The net impact on our past quarter tracking estimate was modestly negative. After rounding, our Q1 real GDP tracking estimate is unchanged at 2.3% q-o-q saar.”