May Construction Spending Reverses April Gains

Construction spending fell 0.9% in May, completely offsetting the revised 0.6% gain in April (which was initially 0.8%). This is slightly weaker than the consensus forecasts. Overall, construction spending has fallen 11.6% from year ago levels. Residential construction was poor, off 3.5% after a flat reading in April. Yet we know that housing starts rose from 454k in April to 532k in May. Non-residential construction rose a meager 0.1% after a 0.8% gain in April. Private spending fell 1% in May and public spending fell 0.6%.

While the residential mortgage market remains distressed, there are some signs that house prices are beginning to stabilize, though it is a very preliminary view. Some economists point to the rent-price ratios, which are arguably comparable to p-e ratios in equities, which shows the rental yields have risen to the highest level since 1987.

In recent weeks, a number of Fed officials appear to have expressed more concern over the commercial real estate market than the residential real estate market.
May Construction Spending Reverses April Gains May Construction Spending Reverses April Gains Reviewed by magonomics on July 01, 2009 Rating: 5
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