US Construction Spending Ticks Up

The US census bureau announced April construction spending data on June 1. Overall, April construction spending rose to a seasonally adjusted rate of $968.7 billion, up 0.8% of from March.

While the increase was surprising, the April number was still 10.7% lower than the April 2008 estimates. YTD through April, total construction spending was down 11.3% from the same period in 2008.

Private construction spending was $657 billion in April, 1.4% higher than March and 16.1% lower than April 2008. Residential construction spending was 0.8% higher than March and 34% lower than April 2008. Non-residential private construction was 0.8% above March numbers and 2.5% higher than the year earlier quarter, with the largest y/y increase coming in Manufacturing, 70%, and Power, 26%. Public construction spending was 0.6% lower than March and 3.3% higher than April 2008. The largest y/y increases in public spending was in Office, 20%, and Public Safety, 18%.

While construction is still well down from 2008, new numbers are somewhat 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 commercial and residential construction should continue to fall well into 2010 as developers scale back. Many projects under construction now where planned several years ago. Although 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.