Construction Spending Advances 1.2 Percent

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2013 was estimated at a seasonally adjusted annual rate of $885.1 billion, 1.2 percent above the revised January estimate of $874.8 billion. The February figure is 7.9 percent above the February 2012 estimate of $820.7 billion. During the first 2 months of this year, construction spending amounted to $120.1 billion, 6.6 percent above the $112.6 billion for the same period in 2012. Private Construction Spending on private construction was at a seasonally adjusted annual rate of $613.0 billion, 1.3 percent above the revised January estimate of $605.2 billion and 12.6 percent more than a year ago. It is encouraging to see residential construction continue to grow. Residential construction was at a seasonally adjusted annual rate of $303.4 billion in February, 2.2 percent above the revised January estimate of $296.9 billion. This was led by single family homes, which posted a gain of 4.3 percent, surging 34.1 percent from February 2012. This is good news for home sales, as both real estate agents and contractors note that tight inventories have suppressed home sales in some markets, as buyers face a dearth of properties that may or may not suit their needs. Thus, more homes on the market to choose from, in this case, may mean more home sales. Nonresidential construction was at a seasonally adjusted annual rate of $309.6 billion in February, 0.4 percent above the revised January estimate of $308.3 billion. Lodging, followed by healthcare construction, posted the biggest increases, up 4.8 percent and 3.1 percent, respectively. Private educational facilities also rose, posting a 2.7 percent advance. Office construction, while up a more modest 0.3 percent, is nonetheless 24.6 percent higher than a year ago. Manufacturing construction, also having advanced by 0.3 percent in February, is 9.9 percent greater than the level in February a year ago. This new construction in these categories over the past twelve months signals a greater willingness by companies to invest more in their property and plant, and that could be a sign of a more confident business. Religious, amusement/recreation and communications construction all posted decreases. Public Construction In February, the estimated seasonally adjusted annual rate of public construction spending was $272.1 billion, 0.9 percent above the revised January estimate of $269.6 billion. This is encouraging given the budget cutbacks at all levels of government, though the sequester did not officially kick in until March 1. Educational construction was at a seasonally adjusted annual rate of $63.2 billion, 0.3 percent below the revised January estimate of $63.3 billion. Highway construction was at a seasonally adjusted annual rate of $81.4 billion, 3.4 percent above the revised January estimate of $78.7 billion. However, from a year ago, public construction spending dipped 1.5 percent. Overall, this is a decent report, showing that there are fairly broad-based increases in many categories of construction spending, public and private, as well as residential and commercial.