The US construction expenditure just reached its highest level of the last five years. However, the increase was less than what was expected, pointing towards a mild pick-up, as both residential as well as nonresidential construction shrank in the first quarter.
On Monday, the Commerce Department indicated that the construction expenditure increased by 0.2% to an annual rate of USD 953.5 billion. This is the highest level recorded since March 2009. The economists had expected a 0.6% increase, therefore, the construction spending of March was revised to indicate a 0.6% rise, instead of a 0.2% advance reported previously. The spending in April was dominantly led by public construction outlays, which increased 0.8%. In addition, spending on federal government, local government and state projects increased solidly.
However, expenditure on private construction projects was somehow flat, as a 0.1% increase on residential expenditure was neutralized by a 0.1% fall in nonresidential projects. Nevertheless, the spending on private residential construction reached its peak since March 2008. Increments in both single as well as multi-family house building were recorded; an encouraging sign in terms of housing that is striving to find momentum.
Furthermore, a marked increase in mortgage rates has hindered the housing market retrieval. Investments in home building as well as nonresidential structures that include gas pipelines and factories shrank in this year’s first three months for a second consecutive quarter.
Also, the economy contracted at a 1.0% rate in Q1, predominantly reflecting an extremely cold winter, and a slow speed of restocking by businesses.