Econoday Report: Construction Spending 3, 2006

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Construction Spending

Definition
The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars. Why Investors Care

Released on 7/3/06 For May 2006

Construction Spending, M/M change
Actual	-0.4%
Consensus	0.3%
Consensus Range	-1.0% to 0.8%
Previous	-0.1 %

Highlights
Construction spending fell 0.4 percent in May following a revised 0.2 percent decline in April. May's figure was significantly below the consensus forecast for a 0.3 percent increase and was the largest decline since September 2004. For May, private construction dropped 0.6 percent while public construction rose a robust 0.7 percent. Residential construction fell 0.8 percent with single-family homes down 1.7 percent. Single-family outlays also dropped by 1.7 percent in April. Clearly, we are seeing the lagged impact of the downtrend in housing starts. In contrast to recent months, nonresidential construction spending slipped 0.3 percent in May but followed healthy gains of 1.6 percent and 2.4 percent for April and March, respectively. Nonresidential weakness for May was in commercial and manufacturing construction. Nonetheless, nonresidential outlays have been on a strong uptrend and are up 12.7 percent from a year ago. Today's outlays numbers still point to strong numbers for second quarter business investment in structures within real GDP. However, residential investment numbers will probably be nudged down after today's figures.

Market Consensus Before Announcement
Construction spending dipped 0.1 percent in April, following an unrevised 0.9 jump in March. Public construction was basically flat. Residential outlays fell while non-residential was strong. Construction outlays are now starting to paint the picture for second quarter residential and non-residential structures components in real GDP. Will we see the expected moderation in residential investment along with continued positive growth in non-residential structures? Despite May's uptick, starts have trended down recently and starts lead residential outlays. Corporate profits have been bulging and are likely to support structures investment.

Construction spending for May 06: +0.3 percent
Range: -1.0 to +0.8 percent

Trends

Construction spending has moderated significantly over the past year despite strenth in the housing market. Residential construction is not growing as rapidly as it did even though current levels are high. Nonresidential construction has begun to improve, but gains are still modest.

Data Source: Haver Analytics

2006 Release Schedule

Released On: 1/3 2/1 3/1 4/3 5/1 6/1 7/3 8/1 9/1 10/2 11/1 12/1

Released For: Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct