Construction Spending Climbs Slightly

(Courtesy Census Bureau, Wells Fargo Economics)

Construction spending rose 1.2% during April, the Census Bureau reported.

April’s gain translated to a 7.2% annual increase, Wells Fargo Economics noted in an analysis.

The Census Bureau calculated construction spending during April at a seasonally adjusted annual rate of $1,908.4 billion, 1.2% above its revised March estimate, $1,885.0 billion. Construction spending amounted to $566.7 billion during the first four months of 2023, 6.1 percent above the $533.9 billion for the same period in 2022.

“Total [construction] outlays have now risen for three consecutive months,” Wells Fargo Economics said. “While the threat of a recession looms large, the construction industry appears to be enjoying more favorable supply-side conditions at present.”

Construction supply chains remain unsettled compared t before the pandemic, but building material price inflation has moderated considerably, a relief from the rapid run-up over the past several years, Wells Fargo Economics said.

“Looking ahead, the tightening in lending standards following recent banking sector volatility will certainly be a headwind for construction,” Wells Fargo Economics said. It noted the forward-looking Architecture Billings Index published by the American Institute of Architects slipped to 48.5 in April, which suggests reduced access to credit may be weighing on the project pipeline. “That noted, the construction industry continues to benefit from structural shifts brought on by the pandemic. Residential spending rose in April thanks in large part to another solid gain in home improvement spending. The recent surge in home prices, rise of remote work and shortfall of single-family homes for homeowners to trade-up into has resulted in a notable upshift in home improvement projects.”