Construction Spending Surprises

The US Census Bureau announced today that construction spending rose to a seasonally adjusted rate of $969.7 billion, up 0.3% of from February.

While the increase was surprising, the March number was still 11.1% lower than March 2008. Private construction spending was $661 million in March, 0.1%  below February and 16.3% lower than March 2008.

Residential construction spending was 4.2% lower than February and 33% lower than March 2008. Non-residential private construction was 2.7% above February numbers and 1.2% higher than the year earlier quarter, with the largest y/y increase coming in Power, 15.2%, and manufacturing, 64%.

Public construction spending was 1.1% higher than February and 2.6% higher than March 2008. The largest y/y increases in public spending was in Manufacturing, 64%, and Power, 18.2%.

While construction is still well down from the boom years, new numbers are encouraging and the declines were not as bad as expected. This could be a sign that the economy is beginning to stabilize.

Going forward, private construction in commercial and residential should continue to fall as developers continue to scale back projects. However, government incentives are starting to stimulate home buying, which will inevitably lead to more residential starts. Public construction projects will get a huge boost from government stimulus money that is now flowing to state and local governments. The stimulus package includes over $130 billion related to infrastructure projects.