Stale Data Watch: Construction Spending for October — More “Green Shoots”?
•January 21, 2026
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Why It Matters
The uptick signals an early rebound in the housing sector, a key driver of U.S. economic activity, and may foreshadow broader macroeconomic improvement.
Key Takeaways
- •October construction spending rose 0.5% nominally.
- •Residential construction up 1.3% nominal, 1.5% real.
- •Real spending hit 9‑month high.
- •Near 10‑month nominal highs for both series.
- •Suggests early housing rebound after low mortgage rates.
Pulse Analysis
The latest Federal Reserve Economic Data (FRED) release shows October construction spending edging higher, a noteworthy development given the sector’s reputation as a leading economic indicator. While total nominal spending grew 0.5%, the residential component outpaced the broader market with a 1.3% rise, translating to a 1.5% gain in real terms after material price deflation. These figures bring both metrics near ten‑month nominal peaks and set a nine‑month record for real residential spending, hinting that the market may be turning after a prolonged slump.
Underlying this modest recovery are two pivotal forces. First, mortgage rates have lingered at three‑year lows, reducing financing costs for homebuilders and prospective buyers alike. Second, the Producer Price Index (PPI) for construction inputs slipped 0.2%, effectively lowering the cost base for new projects. Together, they have lifted residential construction activity ahead of lagging indicators such as housing starts and construction employment, which traditionally follow spending trends. The alignment of lower financing costs and material price relief creates a conducive environment for developers to resume projects that were previously shelved.
Looking forward, the data should be interpreted with caution. While the upward movement suggests nascent “green shoots,” longer‑term interest‑rate volatility—potentially driven by geopolitical tensions—could quickly reverse the trend. Nonetheless, investors and policymakers will watch construction spending closely, as sustained gains could translate into higher employment, increased consumer confidence, and a broader economic upswing. For market participants, the current trajectory offers a tentative but encouraging signal that the housing market may be re‑entering a growth phase, reinforcing its role as a bellwether for U.S. economic health.
Stale data watch: construction spending for October — more “green shoots”?
- by New Deal democrat
Originally housing permits and starts through December were supposed to be updated this morning, but that has now been put off another week. In the meantime, we did get some data, albeit stale, about the important leading sector of construction, in the form of the construction spending report through October. And it added to the very small patch of evidence suggesting that some “green shoots” may be forming.
To wit, as shown in the graph linked to below, in October nominally total construction spending rose 0.5%. More importantly, the long leading sector of residential construction spending rose 1.3%. Since the cost of construction materials in the last PPI report declined -0.2%, in real terms spending rose 0.7% and residential spending rose 1.5%:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1QKCy&height=490
In absolute nominal terms, both series rose to close to 10 month highs:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1QKBO&height=490
In real terms, residential construction also made a 9 month high:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1QKFw&height=490
Keep in mind that construction spending is one of the latter housing series to turn, although it generally turns before housing units for sale and residential construction employment. Across almost all the more leading housing data, the trend in the past few months has been a leveling out or even some small improvement. Even prices (which follow sales) may be leveling out.
All of this is downstream of the 3 year lows in mortgage rates. Of such small things are “green shoots” made (subject, of course, to longer term interest rates blowing out to the upside due to T—-p’s blowing up NATO).
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