Construction Spending: Improvement Spending Shows Strength

After recent positive data revisions, seasonally adjusted improvement spending has shown growth during the spring of 2013.  The current pace of improvement spending is the highest since 2007. This improved picture of the remodeling market is consistent with NAHB surveys of remodelers, suggesting improving market conditions during the second quarter

According to the current Census construction spending report, total private residential construction spending was effectively unchanged at a seasonally adjusted annual rate of $332.1 billion in June 2013. The May rate of $332.2 billion was the fastest pace since September 2008. The current reading is 18.1% higher than a year ago.

Single-family spending registered a slight decline (0.8%) for the month, while the more volatile multifamily category was down 3.3% in June.

constr spending_8_13

The Census data concerning home improvement spending has changed markedly over the past few months. Post-revisions, on a 3-month moving average basis, the improvement category experienced weakness during the second half of 2012. In contrast, over the course of 2013 remodeling related spending is up 16.2%.

This is a significant reversal with respect to initial reporting, which had just the opposite narrative: weakness during 2013 and strength at the end of 2012.

Taken together, the data illustrate the degree to which residential construction activity is growing off cycle lows. Since market low points, total private residential construction spending is up 45.3%, single-family 80.8%, multifamily 136.9%, and improvement-related spending 30.7%.

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