Why You Should be Paying Attention to Construction Spending

The much-hyped wall along the Mexican border may not be in sight but increase in construction spending is a reality. The construction industry in America is growing humongous and in February, spending rose to the highest in 11 years. Construction of highways, schools, and homes is now at an all-time high, giving the construction industry a much-needed boost. Should you be concerned about this spending? Is this going to change your life? Here are a few points to be noted.

Construction Spending
Construction Spending

Sudden Rise in Construction Spending

 

For two months, preceding February, construction spending was on a decline. However, in the second month of the year, construction spending has reached its highest levels since April 2006. This is an acute shortage of homes, especially with a rise in demands becoming steeper by the day. Even if construction is at a high, it is still not enough to feed the demand. Consequently, the prices of existing homes are skyrocketing. Moreover, the construction of new homes and spending on this sector will continue to grow for some time.

The Numbers Tell a Story

 

Per the Commerce Department, spending on construction rose by 0.8 percent in the month of February. Most of this is attributed to the rising demand of homes. The local and state bodies have also upped their construction spending by 0.9 percent. This institutional expenditure is directed towards building new recreational spaces, schools, and new roads. However, we must also notice that the federal government is not too keen on this sector. The construction spending has declined for the second consecutive month. Meanwhile we saw a 9 percent decline in construction spending on a yearly basis.

The Warm Weather Factor

 

We must also attribute the increased spending on construction because of warmer temperatures. Usually, February helps in kick starting the construction sector for the calendar year. However, this time, the data shows a spike in the numbers. According to the National Oceanic and Atmospheric Administration, February was a particularly warm month. In fact, in the past 123 years, this is the second warmest February.

Couple this with an increased demand of houses and you get a major rise in consumer spending for the year. Nonresidential spending did not move. Apartment buildings, also called multifamily spending, rose by 2 percent. On the other hand, single family homes were 1.2 percent higher than before. Overall, there was a 1.8 percent increase in the construction of residential property alone.

The increase in construction spending, will help in bringing down the costs of homes overall. As demand for new homes is increasing, prices need to be kept in control with new constructions. The good news is that residential properties of all types are being built on a large scale, which will hopefully cool down the property market.