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Surge in Home Building Indicates Recovery

Posted by Jim Berg Team on Tuesday, July 3rd, 2012 at 4:57pm.

A surge in homebuilding pushed construction spending up 0.9% in May, the largest amount in five months, further indication that the housing sector is slowly recovering.

Construction spending reached a seasonally adjusted annual rate of $830 billion – 11.3% above the 12-year low hit in February of last year, according to numbers released Monday by the Commerce Department.

The boost was also well above the Barclays Capital estimation of an 0.1% increase and consensus of 0.2%. Continuing the good news, April's rise was revised higher to 0.6% month over month from 0.3% previously. Construction spending now stands 7% higher than last May.

May's increase in spending was driven by a strong 1.6% gain in private spending, with both residential spending and nonresidential spending posting gains of 3% and 0.4%, respectively. This was enough to offset another decline in public construction spending of 0.4% month over month, as both residential public spending and nonresidential public spending decreased 0.8% and 0.4%, respectively.

Michael Gapen, a senior U.S. economist at Barclays, said that within private residential construction spending, the data "reflect our view that US housing is in a moderate recovery phase, led by multifamily starts."

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