Elections Likely Delaying Construction Spending: CreditSights

Construction spending tends to be affected by major political events, with new construction-project delays "natural" amid the uncertainty of a campaign focused on "fitness to serve," personality issues, rather than major policy areas, CreditSights’s Andrew Belton says in e-mail.

  • Has been some focus on security, health care, international relations -- not domestic infrastructure needs/spending
  • For September projects, 1-2 month postponement may be viewed as "prudent" until future public-policy direction becomes clearer, particularly as some have long lead times
    • Most likely with public construction, though residential may also be affected by increased caution
  • Difficult to asses impact of Hillary Clinton vs Donald Trump win, partly due to lack of discourse on domestic policy
    • May be easier to evaluate Clinton, as one would expect "more of the same"
    • Trump harder to model because of his candidacy’s "unique nature," lack of any "meaningful" discussion on his attitude to domestic infrastructure or housing policy
    • Postponed projects may bounce back more quickly with Clinton win; may take much longer for Trump win impact to become clearer
  • NOTES: Nov. 1, U.S. Sept. Construction Spending Fell 0.4%; Est. Up 0.5%
    • Nov. 3, CreditSights wrote U.S. construction spending has been influenced by pre-election "jitters"
  • S&P homebuilding (S15HOME) up as much as 3.4%, most intraday since Aug. 23, led by LGIH, TPH, BLD, MHO, CAA, DHI, MTH, LEN
  • Related:
    • Earlier, Either Clinton or Trump Bullish for 2017 Housing: Cowen
      • Trump may have easier path to helping housing, as he doesn’t need to worry about progressive wing opposing helping bigger banks; Clinton also has incentive to help expand housing opportunity
    • Oct. 24, Citigroup cautiously optimistic on outlook for U.S. construction spending into 2017; cites bi-partisan support for infrastructure development in Washington, better public sector funding environment
      • Lists buy-rated beneficiaries of longer-extending construction upcycle: URI, ETN, HON, IR, ATKR, ACM, JEC, EXP, SUM
    • Oct. 20, Credit Suisse said higher chance of Clinton victory seems good for stocks with high international exposure, industrials; listed potential infrastructure winners: ETN, KMT, CAT, DE, MTW, OSK, ACM, FLR, JEC