US construction spending
The U.S. Census Bureau releases the monthly construction spend. The data is reported with a one-month lag. Construction spending includes expenses incurred on new structures and improvements to existing structures in the public and private sectors. Both residential and nonresidential construction spending figures are released by the U.S. Census Bureau.
The previous chart shows the latest trend in total US construction spending. As you can see, it has been on an uptrend. In the latest reading in March, total construction spending increased 2.2% on a YoY (year-over-year) basis. However, it declined slightly from February. Please note that February’s data was revised upwards recently.
The US builder sentiment index also increased to 56 in April—the highest since January. Most other construction industry indicators have been on an uptrend.
Nonresidential construction spending
Nonresidential construction spending accounts for almost two-thirds of the total construction spending. It increased 4.7% in March on a YoY basis. Residential construction spending declined 2.3% over this period. Now, residential construction spending has declined for seven straight months. However, the decline has been compensated by the increase in nonresidential spending. Total construction spending increased over this period.
An increase in total construction spending is positive for the steel industry. It supplies rebars, joists, and decks to the construction industry. Companies like POSCO (PKX), Steel Dynamics (STLD), and Nucor supply these products. Rebar prices in the US have been under pressure because of cheap imports, especially from Turkey (TUR).
The automobile sector is the second largest consumer of steel products. In the next part of this series, we’ll discuss the latest trend in US vehicle sales.