The Census Bureau announced that construction spending rose 0.9 percent in May, building on the 0.6 percent gain in April. It had declined in the first quarter of this year. The residential sector has been the main driver of this growth, as it was up 3 percent at the annual rate in May. Private sector, nonresidential construction rose 0.4 percent.
Manufacturing construction spending continues to grow. In May, it increased 2.8 percent, with manufacturers spending $48.6 billion at the annual rate. This represents a healthy increase from earlier in the year; in January, the level stood at $44.8 billion. On a year-over-year basis, manufacturing construction is up 26.8 percent.
Other nonresidential construction expenditures that were higher in May include commercial (up 1.3 percent) and transportation (up 0.7 percent). These were somewhat offset, though, by declines among religious (down 8.4 percent), educational (down 3.2 percent), and amusement and recreation (down 1.5 percent) organizations.
Public sector construction was down 0.4 percent for the month and down 3.9 percent since last year. Public residential and nonresidential construction declined 0.8 percent and 0.4 percent, respectively. Nonresidential sectors with the largest monthly decreases by governments include office (down 4.9 percent), educational (down 3 percent), water supply (down 2 percent), and sewage and waste disposal (down 1.3 percent). Gains were reported, though, in power (up 8.9 percent), conservation and development (up 8.5 percent), commercial (up 5 percent) and health care (up 4.5 percent).
In short, the manufacturing sector has recently reported a number of weaknesses in activity. Today’s dismal Institute for Supply Management numbers, for instance, found that new orders contracted in June – a negative sign. Yet, at the same time, manufacturers continue to invest in their businesses. Many sentiment surveys, including the most recent NAM/IndustryWeek Survey of Manufacturers, find that they are cautiously optimistic about modest growth in the months ahead. These construction spending figures tend to back that up, with manufacturers increasing their construction dollars by 2.8 percent in May.
Chad Moutray is chief economist, National Association of Manufacturers.