Industrial Insight

COnstruction | January 18, 2017

US Spending Hits a 10-Year High, Construction MMI Still Flat

by Jeff Yoders on JANUARY 5, 2017
Style:Market AnalysisCategory:Commodities, Metal Prices, MetalMiner IndX, Premium

U.S. construction spending hit a 10-1/2-year high in November, providing a boost to the Atlanta Federal Reserve Bank’s fourth-quarter economic growth estimate. Reports suggest President-elect Donald Trump will inherit a strong economy, with a labor market near full employment, from the Obama administration.

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The Commerce Department said construction spending increased 0.9% to $1.18 trillion in November, the highest level since April 2006. It was boosted by gains in both private and public sector investment. Our Construction MMI stood pat at 75 this month, likely due to the traditional lag-time between increases in purchasing and price increases for some construction products.

Spending on private construction projects jumped 1% in November to the highest since July 2006 as single-family home building, as well as home renovations, increased. Investment in private nonresidential structures, which include factories, hospitals and roads, rose 0.9% after tumbling 1.5% the prior month.

In addition to the good domestic construction product demand news, China’s Caixin purchasing managers’ index rose to 51.9 in December from 50.9 in November and beat market expectations. The figure marks the sixth straight month of growth and the strongest upturn in Chinese manufacturing conditions since January 2013.

Industrial production in China has been the engine that has driven industrial metals price increases for most of the year and real, sustained demand in the world’s largest producer and consumer of commodities is a positive development for all the metals we track. The incoming Trump administration is also threatening to add further barriers to Chinese imports into the U.S. That’s usually a good thing for domestic prices, but trade wars can have unintended consequences, too.

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