US construction is overal tepid, but booming in some ways, and collapsing in another

A relatively tame and mundane monthly report on construction spending came out of the Census Bureau today, and while expectations were exceeded, it still wasn't a major market-mover.

U.S. construction spending increased more than expected in March, boosted by investment in nonresidential structures, but single-family homebuilding remained depressed amid higher mortgage rates.

The Commerce Department said on Monday that construction spending rose 0.3% in March after declining 0.3% in February.

Economists polled by Reuters had forecast construction spending gaining 0.1%. Construction spending increased 3.8% on a year-on-year basis in March.

That's a 3.8% increase in dollars before inflation is accounted for, which means that construction would technically be in recession. But dig further down into the report, and what you see are widely varied levels of growth in the industry, depending on what is being built.

Spending on private construction projects rebounded 0.3% after dropping 0.7% in February. Outlays on private non-residential structures like gas and oil well drilling surged 1.0% in March. Non-residential spending is helping to keep business investment barely afloat.

Investment in residential construction fell 0.2%, with spending on single-family housing projects dropping 0.8%. Outlays on multi-family housing projects climbed 0.4%, continuing to be supported by demand for rental housing.

And that's part of a larger divergence, where single-family home construction has plummeted in the last year, but the value of construction in both multi-family apartments/condos and private construction that's not associated with home building has gone up by more than 20% in the last 12 months.

So a small increase overall has a much more interesting story underneath it, and the effects on the real estate market could be significant in the next couple of years, as inventory isn't being added to the single-family market, which won't help affordability, but there seems likely to be a surge in availability in multi-family complexes, and for office buildings and other business-related facilities.

We've also seen a surge in construction activity in the public sector, reflecting stimulus measures from DC and the state levels. The value of that construction is up 15% overall since March 2022, and up more than that in key infrastructure areas.

And given the huge amount of orange barrels I see in Madison streets and in other places, I can't think that's going to be slowing down as the weather warms in 2023. Particularly since the Inflation Reduction Act and other infrastructure bills really couldn't be bid out and started until late last year and this year. Which helps explain why GOPs want to slow this down, because more construction and a better economy isn't something that's in their interest for 2023 or 2024.

But like a lot of things in this economy, the construction sector keeps surviving, although in a different form than we might have seen at the end of the 2010s. And let's see if that bifrucaction between single-family homes and everything else continues, especially if interest rates stay high throughout the rest of this year.