U.S. Construction Spending Reaches Highest Level in Years

Domestic construction spending in April reached its highest level since November 2008, according to the U.S. Department of Commerce. Total construction spending rose 2.2% above the revised March estimate to a seasonally adjusted annual rate of $1 trillion and is 4.8% above the April 2014 estimate of $960.3 billion. It marks the largest increase since May 2012.

During the first four months of 2015, construction spending reached $288.7 billion, 4.1% more than the same period a year ago. Compared with March, private construction rose 1.8% and total public spending, 3.3%. Private residential construction spending grew 0.6% over the prior month and is 2.1% less than the same month a year ago, while private nonresidential was 3.1% and 13.4%, respectively. Educational construction totaled $63.3 billion, 3.6% above March and highway construction, $87.1 billion, 8.5% more.

“Spending for February and March were upwardly revised, which should provide a boost to structure investment, all things equal,” Wells Fargo analysts said. “Keep in mind, the drilling component of structure investment is not included in the monthly construction spending report, which means we will still see a large contraction in [the first quarter].” Wells Fargo also expects single-family residential construction spending to continue its upward trend, even if May’s report therein “pales in comparison to the April surge.” However, inventory imbalances and the effect of flooding in key markets pose a threat to the prediction.

The firm expects overall construction activity to rise about 8% in 2015. Additionally, nonresidential components of architecture billings show improvement, and residential spending—backed by gains in multifamily housing—should also improve this year. “Firming in underlying economic fundamentals will also continue to boost commercial and industrial outlays,” it said. “Institutional construction spending has lagged commercial and industrial construction spending in the recovery, but should get a boost from healthcare and education building this year.”

- Diana Mota, NACM associate editor

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