Construction Spending Edges up 0.1%

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Construction spending edged up 0.1% in May to a seasonally adjusted annual rate of $956.1 billion, according to a Commerce Department report (link opens as PDF) released today. 

While May's month-over-month increase came in below analysts' expectation of a 0.5% rise, there's still cause for celebration. In this latest report, April's month-over-month growth was sharply revised from an original 0.2% to 0.8%, making May's lackluster bump increasingly understandable. 

In a rare instance since the Great Recession, private spending dipped for May, down 0.3% to a seasonally adjusted annual rate of $682.8 billion. Residential construction proved to be the main drag, down 1.5%. But with strong May numbers for pending home sales, existing-home sales, and new-home sales, there's significant demand-side support for construction spending growth in the months to come.

As private construction dipped, public construction was up 1% in May to $273.3 billion.

US Construction Spending Chart

SAAR = seasonally adjusted annual rate.

Through May, overall construction spending this year is up 8.2% compared to the same period in 2013. Although private construction spending dipped in May, it has accounted for more than its fair share of the construction sector recovery, as budget cuts have pushed the change in public spending solidly into contraction territory.

With strong housing market reports for May, investors should keep a close eye on June's construction report to see whether it can keep up with growing demand.

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