Private Sector Spending and Housing Fuel Construction Economy
The United States Census Bureau reported on Monday that total construction spending edged up 0.4 percent on the month to a seasonally-adjusted annual rate of $860.8 billion. April’s pace is 4.3 percent above the year-ago estimate of $825.1 billion. For the first four months of the year, total construction spending is 4.5 percent above the same period a year ago. For all of 2012, construction spending increased 9.8 percent.
The news is a mixed blessing to anyone looking for strength in America’s beleaguered construction economy. The increase fell short of expectations for a gain of as much as 1 percent. Private sector construction spending took a massive hit during the financial crisis and is only now just recovering. Public construction spending remained resilient during the crisis period, but has begun edging down in light of spending cuts at all levels of governments.
Most of the recent declines in public construction budgets have come at the state and local levels. Total public construction outlays fell 1.2 percent, led by a 1.3 percent decline in state and local spending, which compares to just a 0.1 percent decline in federal spending.
The slow but seemingly steadily improving health of the housing market appears to make itself known in the construction spending data. Where the value of total construction put in place has increased 4.3 percent on the year, the value of total residential construction put in place has increased 18.3 percent on the year. This confirms what many separate housing market reports indicate: that residential construction is picking up as demand for new homes increases.
What’s more, public residential construction outlays are down 0.6 percent on the year, while private residential outlays are up 17.5 percent on the year. This suggests that the demand for housing is being met by the public sector, while the government may be winding down some of its construction operations in light of spending cuts.