New home construction spending up 20.9%, public spending plummets

Fifth gain in the past six months

According to the U.S. Department of Commerce, spending on construction projects rose 0.6 percent in September, the most recent month of their reporting, which has counterbalanced the falling commercial and government construction spending in recent months. While a very small increase, it is roughly what economists expected for this report, and offsets a 0.1 percent decline in August, according to revised data.

Private residential construction rose 2.8 percent to $285.86 billion, the highest level seen since December 2008, up 20.9 percent from September 2012. New home construction has been one of the hardest hit segments of the hardest hit sectors, so this improvement is welcomed news for anyone with a close eye on the economy. Some will call this a comeback, but comparing spending today to recent years paints a dismal picture, but one with glimmers of hope for a healthy road to recovery. Meanwhile, private non-residential construction (manufacturing, offices, etc.) fell 0.1 percent for the month.

Residential versus non-residential spending

To further illustrate the contrast between residential versus non-residential, the Commerce Department reports that business investment in building declined in the third quarter for the first time since early 2011.

Total private-sector construction spending increased 1.3 percent in September, and public sector construction fell 0.8 percent, marking its lowest level in nearly six years as government budgets are slashed in response to a stalled economy. Federal construction was down 6.2% and state and local spending fell 0.3%.

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Economic indicators are conflicting in recent months as spending in some sectors is up, but sliding in others, which is how all housing economic indicators are right now, as the sector finds its bottom.