Construction spending slipped 0.6% in May, according to numbers released today by the U.S. Census Bureau. The situation, however, is somewhat better than it appears.
The decline was brought on by improvements, a poorly estimated category—so unreliable, in fact, that the Census does not itemize it in the report. Patrick Newport, U.S. economist at IHS Global Insight, recommends subtracting improvements from the construction spending numbers for a more accurate estimate. In May's report, once the improvements estimate is subtracted, he says, construction spending was flat.
While that may not sound like much of a boost, for a category that has been sliding downward since October 2007, flat is a welcome change.
Private nonresidential spending picked up again in May with a gain of 1.2%, the third improvement in four months. While noting that it’s too soon to tell for sure, Newport is hopeful that the category "may have at last hit bottom."
Residential spending in the private sector fell 2.1% for the month, but if improvements are subtracted, that loss shrinks to 0.5%. While both single-family and multifamily sectors contributed to that loss, Newport sees hope for multifamily’s near future due to the fact that starts and permits in that sector appear to be turning around.
Single-family spending, however, has no such hope. "Single-family starts and permits are still stuck near the bottom, and we are not seeing any light at the end of the tunnel," Newport said in a release discussing the numbers.
Public construction fell 0.8%, due to a drop-off in infrastructure projects. May represented the eighth straight month of declines for the category, which Newport expects to fall further through next year.
Claire Easley is a senior editor at Builder.
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