U.S. Construction Spending Drops in May

U.S. construction spending fell 0.4 percent in May, according to monthly figures released by the Department of Commerce.

Following a decrease in April, this marks two straight monthly drops in spending, a potential sign that the housing market could be cooling off.

Residential construction fell 0.8 percent in May, following a decrease in April. Private nonresidential spending fell 0.3 percent.

However, Ken Simonson, chief economist for the Associated General Contractors of America (AGC) points out a 0.7 percent increase in public construction as a bright spot in a gloomy month.

Simonson says that the two leading public categories—highway and street and educational—rose 0.1 percent and 0.5 percent for the month. “Year-to-date highway spending was up 15 percent, boosted by exceptionally mild weather in the winder and early spring of 2006 and by steep increases in asphalt, diesel fuel and concrete prices. Educational spending was up 7.5 percent in January-May 2006 compared to the same months of 2005.”

Simonson adds, “Public construction is still growing but may slow as more agencies find their budgets will not cover the leap in construction costs. More projects are likely to be cancelled or redesigned as costs for paving materials, metals and plastics keep rising at double-digit rates.”