Construction Declines, ISM Manufacturing Falls

- Construction spending for October fell 1.0% versus estimates of a .4% decline and a downwardly revised .8% decline in September.
- ISM Manufacturing for November fell to 49.5 versus estimates of 51.5 and a reading of 51.2 in October.
- The ISM Prices Paid Index for November rose to 53.5 versus estimates of 49.8 and a reading of 47.0 in October.

BOTTOM LINE: Construction spending in the US fell the most since 2001 in October, led by a drop in home building, Bloomberg reported. Private residential construction spending fell 1.9% versus a 1.4% decline in September. Commercial construction has held up much better, rising 16.4% from year-ago levels, as businesses build new plants and offices after posting the strongest profit growth in 22 years last quarter. I expect construction to only improve modestly over the intermediate-term even as the housing market stabilizes as builders continue to bring down inventories, while commercial building remains healthy.

Manufacturing in the US unexpectedly contracted last month, Bloomberg reported. The prices paid component of the index rose to 53.5 versus 47 the prior month. The employment component of the index fell to 49.2 from 50.8 the prior month. The new orders component fell to 48.7 versus 52.1 prior. The orders backlog component rose to 46.5 from 44.5 prior. I expect manufacturing to begin improving back to more average rates early next year as auto production cutbacks subside and housing stabilizing at relatively high levels.