U.S. construction spending rose to its highest level in 10 years, raising economic growth for the final quarter of 2016, according to the Commerce Department (census.gov/construction). Construction spending rose by 0.9 percent to $1.8 trillion, boosted by gains in both the public and private sector investments. Overall construction spending was up by 4.1 percent from the previous year. Construction spending in October 2016 was also strong with an increase of 0.6 percent, which prompted economists to raise their gross domestic product estimates for the fourth quarter.
The U.S. Commerce Department survey shows construction work done each month on new structures or improvements of existing structures for both the public and private sectors. Spending on private construction work for development of single family homes, and home renovation improvements increased by 1.0 percent to its highest point since July 2006. Investment increased by 0.9 percent in November for private nonresidential structures, including factories, hospitals, and roads.
Public sector construction spending increased by 0.8 percent in November, 2016. This represented four straight months of growth in spending. Construction spending by state and local government rose 0.6 percent, also gaining for four consecutive months. Construction work spending by the federal government rose 3.1 percent in November, compared to an October increase of only 0.2 percent.
U.S. Manufacturing Expands in December
Economic activity in the manufacturing sector also grew during the fourth quarter of 2016. The Institute for Supply Management (instituteforsupplymanagement.org) reported that the overall economy grew for the 91st month. “Of the 18 manufacturing industries, 11 are reporting growth in December,” according the Bradley Holcomb, the chair of the Institute for Supply Management. The U.S. manufacturing index rose to 54.7, an increase of 1.5 percent. The ISM manufacturing index was above 50 for nine of the last 10 months. A reading above 50 indicates an expansion in the manufacturing sector, while a reading below 50 indicates a contraction in growth. The Institute for Supply Management report also shows that U.S. factories have steadily rebounded after hitting a rough patch in late 2015 and early 2016.
Source: December 2016 Manufacturing ISM Report on Business, January 3, 2017
Source: U.S. Census Bureau News, U.S. Department of Commerce, “November 2016 Construction at $1.182.1 Billion Annual Rate,” January 3, 2017
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