Friday, June 29, 2007

Construction Spending Increases

From CBS MarketWatch:

Spending on U.S. construction projects jumped 0.9% in May, the most since February 2006, boosted by hefty gains in spending on federal and private nonresidential construction projects.

The gain outpaced economists' expectations. Analysts surveyed by MarketWatch were expecting construction spending to rise by just 0.1% in May. See Economic Calendar.
Spending on federal projects climbed by 4.1%, the most since October 2006, the Commerce Department reported.

Private nonresidential construction spending rose by 2.7% in May. Public construction spending, meanwhile, rose by 2.2%.

Once again, however, spending on private residential projects like homes and apartment buildings dropped, reflecting a still-weak housing market. Outlays on private residential projects fell by 0.8% in May, following a decline of 0.4% in April.


Here's a link to the complete report

Some interesting points.

1.) A year ago, nonresidential construction was 44.28% of total construction spending. Now that total is 52.72%. Obviously, this means nonresidential spending is now just as important if not more so than residential spending.

2.) There was an across-the-board increase in all areas of business spending -- hospitals, amusements, water, roads, power, communication, etc.... Some of this is probably due to seasonal factors. It's easier to build things in the summer than the winter.

3.) There's been speculation about how the housing slowdown would impact construction employment. It now appears that the ramping up in business spending has helped to alleviate a slowdown in residential hiring. Total construction employment has decreased slightly, but not precipitously. So long as business continues to spend at current rates, this trend will probably continue.

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