Construction spending defied projections in April by gaining in the private sector and declining in public projects—the opposite of what many prognosticators had foreseen.
Overall, construction spending rose 0.4%, according to the U.S. Census Bureau. Most of the improvement came from private residential construction, which gained 3.1% from March, reaching $232.1 billion for the month. Private nonresidential spending increased by 0.5%.
Unfortunately, those private residential gains were ill-gotten. When calculating spending for private residential construction, the Census includes estimates for home improvement spending that is poorly calculated and therefore subject to downward revision.
“The improvement numbers are bad because they’re trying to guess how much improvement you’ve done on your garage or your kitchen,” Patrick Newport, U.S. economist at IHS Global Insight, explained on a call with Builder. “There’s really no good way to measure that, so they take small samples. But because the sample size is so small, it’s not reliable.”
Once improvement numbers are subtracted, Newport said, overall construction spending fell 0.8% for the month, reaching the lowest level since January 1999. Without improvement numbers to bolster it, private residential spending for April fell 0.9%, with drops in both single-family and multifamily spending.
However, Newport sees hope for the multifamily sector based on improving starts and permits. “Those numbers are probably going to get better soon,” he said.
And with private nonresidential construction logging its third straight month of improvements, Newport said, that market “may have turned around a few months ago.”
Public construction spending, however, declined for the sixth month in a row, dropping by 1.9% in April to $282.0 billion. The largest monthly decline came from transportation spending, which fell 7.0%. The continued declines are fallout, Newport said, from infrastructure projects President Obama put into place last year that are now wrapping up. Newport expects the sector to continue to decline through 2012.
Claire Easley is senior editor, online, atBuilder.
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