Residential Construction Spending down

Construction spending fell by less than consensus forecasts in May declining 0.2% in the month. Private residential construction spending fell 0.4% in May, while private nonresidential construction outlays declined 0.6%.

BOTTOM LINE: The residential construction data are lagging indicators of activity but helpful in estimating current quarter GDP. Despite the small decline in May, the data point to a rebound in residential investment in the second quarter—in part a rebound from weather-depressed levels of activity in the first quarter. However, we do not expect construction spending to contribute significantly to growth in the second half of the year once the impact of the expiration of the tax credit for homebuyers has worked through the system (note that Congress has extended the time to complete the sale until the end of September from the end of June.

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