The Econoday consensus expected a bounce in May construction spending but the only bounce was an April revision from -1.4% to -0.7%. May was flat vs an expected bounce of 0.5%.
Spring 2017 was not the greatest for the nation’s housing sector where data have been mixed at best. Permits have been down and spending data are flat to down with construction spending unchanged in May which hits the very lowest estimate in Econoday’s consensus range.
And the weakness is in residential spending, down 0.6 percent overall and including declines for single-family homes, residential improvements, and especially in May for multi-family units.
Private nonresidential spending fell 0.7 percent, with declines in transportation, manufacturing, and commercial. An offset is public nonresidential, up sharply after 2 prior months of declines with the gain centered in education, up 5.1 percent, as roads fell 0.9 percent for a second straight dip.
Public spending in May aside, the slowing in construction spending is not a positive signal for the housing sector nor for second-quarter GDP. The housing sector moved higher at the beginning of the year but has stumbled since.
- Total Private: -0.6%
- Residential: -0.6%
- Single-Family: -0.3%
- Multi-Family: -3.3%
- Nonresidential: -0.7%
- Commercial: -1.0%
Revisions go all the way bak to May of 2016. Previous revisions have gone back decades.
It was construction spending revisions that caused the GDPNow model to blast into the stratosphere with an initial estimate of 4.3% for first quarter.
Those revisions are all baked into first-quarter GDP estimates, for which we have seen the final numbers.
March construction spending was $1,239,654. April and May are down a net 0.76%. Construction spending is a heavy favorite to subtract from second quarter GDP.
Mike “Mish” Shedlock