US construction spending slumps in September, nearly reversing August’s gain

US construction spending fell sharply in September, nearly reversing August’s upwardly revised increase. The measure tracks spending on construction work, including residential renovation projects.^[1]

The report identifies high materials costs as the likely reason residential renovation spending weakened.^[1]

Costlier materials raise renovation quotes. Homeowners facing a larger bill may delay work or reduce its scope, leaving contractors with fewer projects and potentially fewer materials to buy from suppliers.^[1]

If the report’s explanation holds, renovation demand faces a cost squeeze: higher material prices can lift the value of each sale, while fewer projects can offset that benefit. The spending decline therefore signals a sales risk for businesses that depend on remodeling activity.^[1]

Impact

• Home-remodeling contractorsRisk

  If materials costs keep pushing up quotes, homeowners may postpone or scale back renovations, reducing contractors’ new orders and revenue from construction work.^[1]

• Building-material suppliers and home-improvement retailersRisk

  Fewer renovation projects could reduce purchases by contractors and do-it-yourself customers. Sellers tied to remodeling demand face pressure on sales volumes even while material prices remain elevated.^[1]

What to watch next

• The November 6 preliminary Michigan consumer-sentiment release for November will help gauge whether household willingness to spend is weakening further, though it does not directly measure renovation demand.