MDM provides a synopsis of construction spending trends each month, with a look at the segments of construction that gained and lost during the month.
Summary
Construction spending in May 2013 was down 0.5 percent from the month before and up 6.2 percent from May 2012. Here is the breakdown:
- Private residential construction spending was up 1.2 percent from April, and up 22.7 percent year-over-year.
- Private nonresidential construction spending was down 1.4 percent from April and down 0.9 percent year-over-year.
- Public construction spending was up 1.8 percent from April, and down 4.7 percent year-over-year.
The May 2013 data was released July 1.
Analysis
“For much of the past year, privately financed activities have been recovering in conjunction with the nation’s moderate economic recovery, while publicly financed construction had been in decline – a reflection of constrained public capital budgets,” says Associated Builders and Contractors Chief Economist Anirban Basu.
“However, in May two large segments closely associated with public financing, water supply and transportation, experienced a material rise in activity,” Basu says. “At the same time, private activity declined in the aggregate, including in manufacturing, communication and commercial categories.”
Basu says any improvement in public construction is likely to be short-lived. “Sequestration is ongoing and state and local government capital budgets continue to be constrained by rising Medicaid, pension, retiree health care and other costs,” he says.
Forecast
Many economic forecasters expect an acceleration of growth later this year and in 2014, according to Basu. “If optimistic economic forecasts prove correct, the upcoming year should be better, with growth in private construction activities leading the way.”
Ken Simonson, chief economist for the Associated General Contractors of America, says hesitancy by private owners to commit to new construction will moderate recovery on the private side. “On the plus side, both new residential spending and improvements to existing homes will keep some contractors busy. Residential spending appears poised for double-digit growth all year long.”
“Federal government construction spending appears headed for the steepest decline of any type,” Simonson says. “Agencies have been cutting back on contracts since 2011 and the pattern seems sure to continue.”
Segment Trends
According to Census Bureau data, the following construction segments overall had the greatest gains or declines in spending in May 2013 from May 2012. It is not broken out by private vs. public sectors.
Winners: Largest Gains from May 2012
- Residential: +22.7%
- Lodging: +18.3%
- Transportation: +10.6%
- Water supply: +9%
- Sewage and waste disposal: +2.1%
Losers: Largest Losses or Smallest Gains from May 2012
- Communication: -13.5%
- Amusement and recreation: -11.5%
- Conservation and development: -10.3%
- Educational: -8.5%
- Public safety: -7.7%