Construction spending dipped 0.8% in May vs. a Bloomberg Econoday consensus estimate of +0.6. The result was well below the low end range of estimates from 09.3% to plus 1.9%.

Construction spending for April, initially reported at -1.8%, is now listed at -2.0%.

Construction Spending Year-Over-Year

Construction spending 2016-07-01

Highlights

Construction spending proved surprisingly weak in May, down 0.8 percent vs expectations for a 0.6 percent gain. The decline follows an even steeper and downwardly revised 2.0 percent drop in April. Spending on single-family homes, despite the rise underway in housing starts, fell 1.3 percent in May for a third straight decline with the year-on-year gain moving slightly lower to a still constructive 6.3 percent. Spending on multi-family homes has been much stronger, up 1.8 percent in the month for a 23.9 percent year-on-year gain.

Construction spending on non-housing has been very soft with May down 0.7 percent following April’s 0.1 percent dip. Year-on-year, private nonresidential spending is up 3.9 percent led by the office category and pulled down by manufacturing. Public spending on buildings and highways has been flat to slightly negative.

Housing is on the climb this year but a gradual one, which has its positives given the bubbles of the past. The construction sector as a whole still looks to be a positive contributor to overall economic growth.

Recent History

Bouncing back from a 1.8 percent plunge in April, construction spending is expected to rise a consensus 0.6 percent in May. Construction spending has seen bursts of strength this year even though the year-on-year rate is at a 3-year low of only 4.5 percent. But details in this report have been favorable especially an 8.0 percent year-on-year gain for residential spending, the result of strength in both new home sales and also home improvements.

More Report Details

Total construction spending is up only 2.8% from a year ago. Year-over-year strength is heading downhill fast.

Residential single family construction is down for the third consecutive month, but multi-family construction is still strong, up 1.8% on the month and 23.9% from a year ago.

For those who wish to see more details, here’s a link to the Census Bureau report on Construction Spending.

Mike “Mish” Shedlock