Private residential construction spending showed a moderate improvement in March, but the increase was the result of a strong rise in the volatile home improvement sector—spending on single- and multi-family housing continued to decline. The Construction Spending report from the Bureau of Census indicated a 2.6% increase in private residential construction spending to $229.1 billion, with a large downward revision to the February numbers (February private residential construction spending was revised down to $223.25 billion from the previously reported $228.6 billion). 

Home improvement expenditures rose 7% to $110.7 billion, following a major downward revision for February (February home improvement spending was revised down to $103.5 billion from $109.8 billion). However, single-family construction spending was 1.0% lower at $105.9 billion and multifamily construction spending was down 2.2% at $12.5 billion.

The weak single- and multifamily construction spending numbers reflect the depressed state of the housing sector, with housing starts struggling to gain any forward momentum since the steep decline in the three months following the conclusion of the home buyer tax credit in mid-2010.  While single family housing starts have bounced around, they have made little progress since July 2010.  Similarly, multifamily housing starts have fluctuated widely, but returned to their July 2010 level in February and March 2011. 

However, there may be some sunshine on the horizon, with a moderate rise in housing starts in March.  If sustained through April and May, further growth in housing starts will support an increase in residential construction spending in the next few months.

Total private construction spending was up 2.2% to $476.1 billion. The increase in private residential construction spending was supported by a 1.8% increase in private non-residential construction spending to $247.0 billion. The improvement, lead by in a rise manufacturing (+5.5%), lodging (+4.7%), education (+3.1%), power (+2.9%) and healthcare (+2.2%) expenditures. 

Government expenditures remained steady (+0.1%) in March, with a rise in healthcare (+3.0%) and transportation (2.2%) expenditures offset by declines in spending on conservation and development (-5.9%), power (-4.6%) and water supply (-2.3%).

Overall, total construction spending was up 1.4% to $768.9 billion in March.