Editor’s note: We have restated the March Construction MMI to 80. An error in tabulation last month caused us to under-report it at 77. MetalMiner regrets the error.
U.S. developers opened up their wallets in February and construction spending increased to the highest level of spend in nearly 11 years, led by more building of homes, highways and schools.
Our Construction MMI remained at its corrected score of 80 this month.
Construction spending rose 0.8% to $1.19 trillion in February to the highest level since April 2006, after two months of declines, the Commerce Department said. New home sales remained strong despite a rather steady supply of newly constructed houses, apartments and condominiums coming onto the market.
Spending on new home building, as well as renovations, rose nearly 10% in the final three months of 2016, the most in a year.
The biggest move, though, came from government construction projects. State and local governments spent 0.9% more on construction, driven by roads, schools and recreational buildings.
The federal government actually cut construction spending for the second straight month and has cut back 9% from a year ago but that could soon change if an infrastructure plan emerges this year in Washington, D.C. President Donald Trump has pledged to boost infrastructure spending by $1 trillion over the next decade. Trump has focused on healthcare and now, apparently, tax reform.
Meanwhile, the Institute for Supply Management said its index of national factory activity fell to a reading of 57.2 last month from 57.7 in February, which was the highest since August 2014.
Any reading above 50 still indicates an expansion in manufacturing, which accounts for about 12% of the U.S. economy and construction materials such as steel framing and rebar are counted in ISM’s factory output numbers.
17 Of the 18 manufacturing industries reported growth and no industry reported a contraction. Comments from factories were mostly upbeat, with machinery manufacturers saying that business was up 10 to 15%.
Optimism about relaxed regulation and the generally pro-business approach of the Trump administration still seems to be buoying both construction and consumer spending but if Trump cannot implement his agenda this optimism could quickly wane. An infrastructure plan that can make it through the Congress continues to be a necessary priority for metals manufacturers and the economy at large.