Overall construction spending dipped slightly in January after upward revisions for December and November cast a positive light on the sector, the Associated General Contractors of America reported last week.
Yet residential construction came out stronger for the month and year-over-year than private nonresidential spending, which saw mixed results, and public construction, which declined in response to congressional holdups in passing an array of long-term infrastructure and tax measures.
Private residential spending was up 1.8 percent from December and 6.7 percent compared with the same month last year. New single-family construction saw gains, growing 2.5 percent over last month and 5.5 percent for the year. New multifamily construction increased by less than 1 percent for the month but was up 20 percent for the year. Improvements to existing residential structures rose by 1.3 percent during January and 6.4 percent for 2011.
But it was less about consumer goodwill than it was good weather that caused the spike, particularly in new construction, says Ken Simonson, the association’s chief economist. “Extremely cold or snowy weather might keep home builders from being able to clear ground and excavate,” Simonson says. “Perhaps more importantly, such weather would deter would-be homebuyers from visiting model homes and signing contracts that would trigger starts.” In other words, it’s likely that unseasonably mild weather could have contributed to the increased number of starts in the winter months—a trend that would be more apparent following the release of February’s numbers.
“January 2011 was marked by exceptionally cold and snowy or icy weather in many regions, whereas January 2012 was almost snow-free,” he says. “The combined January-February data for the two years should show only true economic impacts, with temporary weather distortions removed.”
However, he adds that “any weather-related speedup or slowdown of housing starts should reverse as soon as the weather stops being out of the ordinary.”
