Housing and Construction to Outpace Capital Spending in Coming Years

Spending on housing and capital infrastructure are the two pillars of recovery and they both have been picking up, but some analysts are saying that one will grow faster than the other. They believe people will want to buy houses in the upcoming years, but businesses may not necessarily spend money on capital equipment to operate them. Morgan Stanley senior economist Ellen Zentner thinks capital expenditure growth is near its ceiling. She said, 'Rather than waiting, waiting, waiting for an acceleration in capex, maybe modest growth is as good as it gets, [but] we still have a lot of recovery left in housing.' Goldman Sachs' chief economist Jan Hatzius shares her belief. He projects construction for new homes will pick up pace and grow 10% to 15% by 2016 and capital spending to slow down to 5% in the meantime. He said, "It is quite unusual for a housing recovery to lag a capital-spending recovery." In the past year, U.S. home sales fell about 5% but the median home price went up, which means there was much more buying on the high end. Going forward, a boost in home sales of the more modest houses will be necessary to drive growth.