US construction spending tumbles in September
US construction spending saw a significant drop in September, nearly erasing the gains from the previous month. High materials costs appear to be a primary factor stifling spending, particularly in residential renovation projects. This cooling in construction outlays is a key indicator, reflecting broader economic trends, and may signal a cautious outlook for the USD amidst concerns over sustained inflationary pressures in the housing market. Tracking these developments is crucial as they could influence monetary policy considerations moving forward.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). The current economic data suggests a challenging environment for construction, influencing sentiments on currency flows in the coming weeks.
How firms align
JPMorgan maintains an optimistic view on the EUR/USD, aligning with the headline's implications, targeting 1.10 for March 2026. In contrast, BofA’s position leans bearish at 1.04, indicating a potential divergence in how firms interpret the economic landscape as influenced by the construction sector downturn.
What the data shows
Recent revisions to forecasts indicate a cautious stance amid rising costs and reduced spending, aligning with our internal assessments. For additional insights, see /research/constructionindex-impact.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Construction spending dropped sharply, hinting at economic contraction.
- 02High material costs remain a significant concern for renovation projects.
- 03Monitor USD reactions as economic data plays into Fed rate expectations.
Market implications
Investors should watch the upcoming economic data for signals on construction activity, particularly any shifts in the consensus forecast of 1.075 for EUR/USD. Insights suggested by construction spending trends could reshape market positioning ahead of key economic announcements.
Risks to this view
A sudden decrease in material costs or a surge in infrastructure spending could invalidate the bearish sentiment stemming from the current construction data. Such developments could prompt a reassessment of currency valuations against the dollar.
Sentiment by currency
USD EUR~JPY~GBP~Composite USD score: -0.35
Sources & References
How we cover this story