US Construction Spending Surpasses Expectations in May, Driven by Single-Family Homebuilding Boom
In May, construction spending in the United States exceeded expectations, primarily due to a severe shortage of available houses for sale, which resulted in increased investment in single-family homebuilding. According to the Commerce Department, construction spending rose by 0.9% in May, following a 0.4% increase in April. Economists surveyed by Reuters had predicted a 0.6% growth in construction spending. Compared to the previous year, construction spending saw a significant increase of 2.4% in May.
Private construction projects experienced a notable boost, with a 1.1% jump in spending. Investment in residential construction rebounded by 2.2% after a 0.9% decline in the previous month. In April, private construction spending had risen by 0.4%. Spending specifically on single-family housing projects saw a notable acceleration of 1.7% in May.
Despite the Federal Reserve’s recent monetary policy tightening cycle, which has had a considerable impact on the housing market, the shortage of available single-family homes for sale has been a driving force behind increased construction activity. This trend was further reinforced by a surge in housing starts during May.
The construction spending report also highlighted a slight decrease of 0.1% in spending on multi-family housing projects in May. Furthermore, spending on private non-residential structures, such as gas and oil well drilling, experienced a modest decline of 0.3%.
Regarding public construction projects, there was a slight increase of 0.1% in spending, following a 0.5% rise in April. State and local government spending showed growth of 0.4%, while outlays on federal government projects decreased by 2.5%.