The Census Bureau’s newest release on construction spending showed a 2.8 percent increase in spending activity for private residential projects in May 2012. On a three-month moving average basis, spending has increased during each of the last 8 months. This release also featured revisions to prior estimates dating back to January 2010. While the modest upswing in total private residential construction activity has been preserved, multifamily construction spending has been expanding at a slightly faster pace than before. Overall, this marks the highest nominal level of residential construction spending since early 2009.
New single-family construction activity expanded for the 12th time in the last 13 months, gaining 1.8 percent versus April and nearly 15 percent from the May 2011 level of spending. Since bottoming out during the second quarter of 2009, spending on new single-family homes has risen more than 33 percent. Although the forecast calls for accelerating growth in homebuilding activity over the next several quarters, a sluggish labor market and tight lending standards are impediments to stronger gains in construction going forward.
As mentioned above, the revisions to historical data produced a modestly stronger recovery for new multifamily construction activity. Nominal spending increased 6.3 percent compared to April and has surged more than 50 percent on a year-over-year basis. Even with an unexpectedly weak reading in May, starts of buildings with 5+ units have averaged 211,000 on an annualized basis since the beginning of the year and permits have averaged 235,000 over the last 7 months. Therefore, new multifamily spending will likely recover further over the course of 2012. Home improvement spending improved for the second consecutive month, increasing 3.6 percent in May, coming on the heels of a 1.5 percent rate of growth in April. Although spending on remodeling held up better than new multifamily and single-family during the housing market downturn, remodeling activity has held within a generally close range since late 2010.