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Construction Spending: Healthy Gains Year-Over-Year


The U.S. Census Bureau of the Department of Commerce announced that construction spending during April 2016 was estimated at a seasonally adjusted annual rate of $1,133.9 billion, 1.8 percent (±1.3 percent) below the revised March estimate of $1,155.1 billion. The April figure is 4.5 percent (±1.6 percent) above the April 2015 estimate of $1,085.0 billion.

During the first four months of this year, construction spending amounted to $334.8 billion, 8.7 percent (±1.5 percent) above the $307.9 billion for the same period in 2015.

Spending on private construction was at a seasonally adjusted annual rate of $843.1 billion, 1.5 percent (±0.8 percent) below the revised March estimate of $855.9 billion. Residential construction was at a seasonally adjusted annual rate of $439.7 billion in April, 1.5 percent (±1.3 percent) below the revised March estimate of $446.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $403.5 billion in April, 1.5 percent (±0.8 percent) below the revised March estimate of $409.6 billion.

In April, the estimated seasonally adjusted annual rate of public construction spending was $290.8 billion, 2.8 percent (±2.5 percent) below the revised March estimate of $299.2 billion. Educational construction was at a seasonally adjusted annual rate of $70.0 billion, 2.5 percent (±3.9 percent) below the revised March estimate of $71.8 billion. Highway construction was at a seasonally adjusted annual rate of $89.4 billion, 6.6 percent (±7.2 percent) below the revised March estimate of $95.7 billion.

According to Patrick Newport, U.S. Economist for IHS Global Insight, the key concept in this report, core construction, is not itemized. It is calculated by adding four pieces used as source data in the national income accounts: single-family, multifamily, state and local government, and private nonresidential construction.

"In the first quarter, core spending racked up a solid 11.6 percent (annual rate) gain. In April, it keeled over," Newport said. "The April drop was partly payback for solid gains in the first quarter and partly a byproduct of rain (April was the 21st wettest April on record going back 122 years.) Whether it was more than this, it is too soon to tell.

"Single-family construction, which reflects activity in single-family housing starts over the prior 12 months, was flat in April, while multifamily construction tumbled 3.1 percent, an obvious payback for a 5.6 percent March gain," Newport continued. "The outlook for residential construction this year is for solid gains driven by a pickup in household formation by young adults.

"Private nonresidential spending, which had been zigzagging around the $400 billion mark for nine months, appeared to climb out of its funk in March when it jumped 1.3 percent, only to settle back into it in April, when it tumbled 1.6 percent," Newport said. "This category consists of 11 subcategories whose recent performances have been mixed – manufacturing and communications are slipping, office and lodging are climbing, and the remaining categories are either moving laterally or inching up.

"Public spending fell 2.8 percent, a likely payback for a strong first quarter when infrastructure spending jumped a whopping 18.1 percent (annualized) as spending related to the Fixing America's Surface Transportation Act (FAST Act) started to kick in," Newport concluded.