Construction Spending

Chart Construction Spending

Construction spending is a great indicator of the health of the underlying economy and therefore one that the team at Allegiant likes to track closely. The chart above shows the year-over-year growth rate of construction spending broken down in two main categories: residential and non-residential. Although the total construction spending (dotted line) growth is still positive, the growth rate has been declining for almost six years. The real drag on construction spending growth recently has been the residential segment (grey line), which turned negative on a year-over-year basis late last year. The housing market has been confronted with rising material and labor costs, along with rising interest rates – which have both hurt homebuyer affordability. While non-residential spending (gold line) has remained strong, largely driven by a recent surge in government-related spending, the drop off in residential housing is a concern. If in fact the declining spending is signifying a looming slowdown in the housing market, that could have a significant impact on the economy. Coupled with additional economic indicators, the construction data supports our narrative that economic growth is set to slow in 2019 after the one-time boost of the tax cut.