US Construction Spending Q1 2014 – growth? This week US consumer confidence jumped to its highest level in nearly 6-1/2 years (85.2) and sales of new homes surged. Purchases of new homes in the US in May showed the highest increase in 22 years. Sales of previously owned homes recorded their largest increase in more than 3-1/2 years. All these are the latest signs that the economy has regained momentum?
Let’s take a look at US construction and see just how it’s doing from a longer term perspective – see the thumbnail chart. First looking at the Total Residential Private Construction Spending, we can see that it has been one the bright spots in the economic recovery, though it had also fallen the most. Even with this week’s good news, it’s still running at nearly half of what it was back in 2006.
Total Public Construction Spending, has been dismal. Other than a few blips, this data series has been in a down trend since the start of the 2008 recession. Cash strapped governments due to poor tax revenues, and a political desire to keep budgets in check, has kept this spending down. Unless we see significant increases in wage growth, that would translate into tax revenues, or a fiscal policy change, this data series looks to continue to bump along the bottom.
Total Private Nonresidential Construction Spending, is also still down, nearly 25% from its highs back before the 2008 economic crisis. Perhaps one could argue, that it has been the most stable of the three data series. US construction spending, when looking at the longer term total picture is still poor. If one would inflation adjust these numbers, an even more of a poor story. It reflects the ongoing struggles for US growth prospects.
All this being said, the short term economic data was reasonably good this week, and does suggests GDP growth will improve over last quarter’s dismal -1.0% performance. The initial reaction in the markets was negative, as the fear of rate hikes and less central bank easing comes back onto the table. The underlying fundamentals for the summer should shake off this “good news is bad” notion, as the equities continue their summer rally.
Blue Point Trading, William Thompson