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business newsConstruction Spending: Don't Let the Headline Fool You
Danger - major disappointment ahead.
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Editor's note: The following is a free issue of The Lavery Insight which was sent to subscribers earlier today. For a FREE trial and regular economic forecasts and analysis, click here.
Construction spending in April significantly exceeded expectations with a gain of 0.8%, following an advance of 0.4% in March. February, however, had a 2.1% decline. On a year-over-year (YoY) basis, construction spending in April was down 10.7%. The YoY peak decline so far in this downturn was March 2009, off 11.8%.
Private construction was down 16.1% YoY in April. The peak YoY decline so far was in March with a YoY drop of 17.9%. Public construction was up 3.3% in April YoY.
Private non-residential spending jumped 1.8% in April, accounting for some of the upside surprise in construction spending overall. Private non-residential spending was up 2% YoY. June 2008, up 19.5% YoY represented the peak for non-residential spending.
Private sector residential spending was up 0.7% YoY in April, the best result in 3 years, but it is highly suspect, as it follows a huge 10.4% decline in February and a 3.6% drop in March. By the way, private construction spending in April worsened to a YoY decline of 34.5%. March had a 29.3% YoY drop.
The explanation for the April gain of 0.7% from March lies in the fact that private sector residential spending excluding new homes was up 8.9% in April. This means folks were spending money fixing up or re-modeling what they have.Construction spending on single family homes actually fell 6.7% in April from March. On a YoY basis single family residential construction is off a record 51.7%, evidencing a still worsening situation. Multi-family residential construction spending fell 2.6% in April from March. The YoY decline in multi-family construction spending is down 20%. Both the month-over month (MoM) numbers and the YoY numbers for multi-family have been worsening.
Public sector construction spending in April at the state & local level was down 0.1% from March, and still up 2.2 % YoY, but it keeps slowing. Federal construction spending fell 6.5% in April, and was up 4% YoY.
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