Construction spending in the month of October rose 1.4 percent from September, with the residential construction market leading the way.

By Peter Ricci

Construction spending, on the strength of the residential construction market, rose 1.4 percent from September to October and 9.6 percent from October 2011, according to the latest figures from the U.S. Census Bureau.

It was another positive month for construction spending, which has grown gradually from its levels a year ago, and has, in the first 10 months of the year, increased 9.3 percent from the same period in 2011.

Construction Spending – Residential Construction Leads the Way

Of the various sectors of construction spending that the Census Bureau follows, residential construction spending proved the most positive for October:

• Residential construction spending was at an annual rate of $294.2 billion in October, a 3 percent increase from September.
• Residential spending, as Bill McBride wrote on his Calculated Risk blog, has now increased 32 percent from its post-bubble low, and on a year-over-year basis, has increased by an impressive 21 percent.
• Overall, private construction spending increased 1.6 percent from September to an annual rate of $582.7 billion.
• In construction’s other sectors, nonresidential private construction spending was up 0.3 percent from September, while public construction increased by 0.8 percent and education spending by 0.9 percent.

Residential Construction Market – Coming Back

The residential construction market, McBride wrote on his blog, is normally the largest sector of construction spending, but it’s been underperforming in recent years following the housing bubble (and is still at 1998 levels).

However, McBride expects residential construction to re-take its position “very soon,” and with housing starts and builder confidence at extremely promising levels, it’s likely that his predictions will ring true as the homebuilding markets enters 2013.