Dive Brief:
- Construction spending slipped 0.8% in May to a seasonally adjusted annual rate of $1.14 trillion, down from the revised rate of $1.15 trillion in April, the Commerce Department reported Friday.
- Private residential construction remained unchanged in May, while private nonresidential declined 0.7%. Within residential, single-family dropped 1.3%, while multifamily rose 1.8%. Public construction dropped 2.3% last month.
- Despite the month-to-month decline, May construction spending was 2.8% higher than May 2015, and spending in the first five months of 2016 was 8.2% higher than the same period last year.
Dive Insight:
May's spending results came in well below expectations, as economists surveyed by MarketWatch forecast a 0.5% gain.
Although spending slid last month, the year-over-year gains signal that the industry isn't facing a major downward trend. Earlier this month, Dodge Data & Analytics reported the value of construction starts between April and May increased 5% to a seasonally adjusted annual rate of $636.7 billion. And the Dodge Momentum Index, which predicts future construction activity, bumped up 2.4% in May.
The continued drop in the public sector echoes ongoing concerns over the ability of local governments to fund their transportation projects. Illinois and Minnesota are just two states recently suffering the consequences of political disputes threatening necessary project funding.
On the residential side, the drop in single-family starts adds to the already rocky housing reports for the month. Aside from the positive news with builder confidence rising two points to a score of 60, housing starts slipped 0.3%, existing home sales grew 1.8% to a nine-year high, new home sales slid 6.0%, and pending home sales tumbled 3.7%.
