Construction Spending Increases 0.4% in April

June 7, 2011

Construction spending increased 0.4% in April, but the first reported 1.4% gain in March was revised to a 0.1% rise. Small April improvements in multi family, health care and communications are likely to persist since these markets appear to be recovering. But a large April gain in power and an even larger gain in residential remodeling are not signals of recovery in these sectors and likely will be revised away or reversed in the next few months. Overall, the construction recovery is set to begin but remains on hold due to the recent weakening in the economy.

A real cutback in public construction, especially buildings financed by municipal governments has been underway since November. was This trend will persist through 2011 as state and local governments are forced to balance their budgets with depressed revenues, exhausted reserves and the end of federal stimulus funds on June 30th. The proposed budgets for FY 2011-12 are spending cuts from the current budget year in almost all states.

The Reed Construction Data spending forecast now projects a 3.7% decline in 2011 although spending will be rising steadily by mid-year. The delayed recovery early in 2011 pushes some work into next year but lowers the 2012 gain to 13.0%. For the spending breakdown, click here.

Source: Reed Construction Data