Construction spending unexpectedly falls in September

What happened

U.S. construction spending fell 1.9% month over month to $2,186.1 billion in September, according to data released by the Census Bureau. That contrasted with economists’ 0.5% growth consensus and followed a revised 2.0% increase in August; spending was 2.7% below its year-earlier estimate.

Confirmed

Global impact / market context

Construction spending measures money flowing into building activity. A decline can mean less revenue for contractors and suppliers, and may lead them to reduce hiring or postpone purchases if weakness continues. The report alone does not show which construction categories drove the fall.

Analyst inference

The September result was weaker than the expected 0.5% increase and the revised 2.0% rise in August. If the decline persists, lower building demand could weigh on construction-related companies’ sales and on suppliers’ orders, but one monthly reading does not establish a lasting trend.

Analyst inference

What to watch

1. Look for updates to the September report and the next monthly spending release; revisions or another decline would clarify whether the weakness is continuing or was temporary. Analyst inference
2. Check whether future Census Bureau data identify which types of construction contributed to the fall, since residential, commercial, or public work can affect different suppliers. Analyst inference
3. Compare later spending readings with companies’ reported sales and orders to see whether weaker construction activity is reaching contractors and building-material suppliers. Analyst inference

Evidence

• seekingalpha.com