US: Expect some reversion in construction spending data – Nomura

Analysts at Nomura explain that US construction spending rose strongly by 1.4% m-o-m in October and for November, they expect some reversion.

Key Quotes

“Much of the increase in October was driven by a sharp 11% increase in state and local educational structure outlays. Despite accounting for only 6% of total construction expenditures, this category contributed roughly 0.6pp of the total 1.4% increase. This implies that October’s strong headline reading is unlikely to be repeated in the near term.”

“Regardless of this monthly volatility, we continue to expect a modest boost from hurricane recovery activity spread over the near term. Also, private non-residential construction increased unexpectedly in October for the first time since May 2017. Given tighter lending standards on commercial real estate loans in recent quarters, it is unclear if this increase will persist near term.”