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Economy in Brief

U.S. Construction Remains a Relative Bright Spot
by Gerald D. Cohen  June 1, 2020

• Construction spending dropped 2.9% in April with net upward revisions to previous months.

• April's decline is small compared to other economic statics; looks closer to recent recessions.

The value of construction put-in-place fell a smaller than expected 2.9% in April (unchanged year-on-year). The Action Economics Forecast Survey expected a 5.3% drop. During the Great Recession of 2008-09 construction spending declined more than 3.0% three times.

While activity in March was revised down to unchanged (was +0.9%), February was revised substantially higher (+0.2% versus -2.5%). In the first quarter GDP report released last week private construction spending (nonresidential + residential) added 0.55 percentage point to GDP growth. This data suggests at least the construction sector will be revised higher.

Private construction decreased 3.0% (+3.8% y/y) in April while public fell 2.5% (+0.8% y/y). Private residential construction dropped 4.5% (6.2% y/y) led by a 9.1% collapse in multifamily (-14.7% y/y). Single family was down 6.6% (+4.5% y/y) while improvements were unchanged (+16.2% y/y).

Nonresidential private construction declined 1.3% in April (+1.1% y/y) with three of largest sectors -- power, commercial, and office down; manufacturing edged up 0.2%. Nonresidential public construction, which makes up 98% of public construction, fell 2.5% (+0.5% y/y) with road building and school spending falling 5.2% and 2.3% respectively. If not offset by federal government support, the drop in state and local government revenues resulting from the COVID related collapse in economic activity will continue to lead to substantial weakness in public construction.

The construction spending figures, some of which date back to 1946 can be found in Haver's USECON database. Mortgage interest rates and loan applications from the Mortgage Bankers Association are in the SURVEYW database and the expectations reading is in the AS1REPNA database.

Construction Put in Place (SA, %) Apr Mar Feb Apr Y/Y 2019 2018 2017
Total -2.9 0.0 0.2 3.0 0.0 3.3 4.5
  Private -3.0 -0.7 0.4 3.8 -2.2 3.2 6.0
    Residential -4.5 -0.2 -0.3 6.2 -4.5 2.8 12.4
    Nonresidential -1.3 -1.3 1.3 1.1 0.5 3.7 -0.7
  Public -2.5 2.2 -0.3 0.8 6.9 3.6 -0.1
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