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The Trend for Construction Spending is "Solidly Up"

Even though data on construction spending shows volatility, the trend is "solidly up" in the United States. That's one of the major takeaways from numbers released by the Commerce Department this week, which you can see here

“The underlying picture of a clear acceleration in spending since last fall remains in place, outside the new-building housing sector, where activity is soft,” per Ian Shepherdson, chief economist for Pantheon Macroeconomics. 

“State and local government spending is particularly strong, heading for a 17% annualized increase in Q2, enough to add about 0.5 percentage points to GDP growth," Shepherdson said. 

In May, spending was in fact 4.5% higher when compared with a year ago. What's more is that for the first five months of 2018, construction spending was 4.3% higher than it was in the same time during 2017.

Spending on private sector jobs continues to lag behind public works. 

Government work was up 0.7% for the month and 4.7% for the year. Private spending was 0.3% higher for the month and 4.4.% up from the 2017 numbers.

As always, economists don't agree on exactly what the numbers mean. And of course it was Harry Truman who joked that he'd like to hire a one-handed economist. He quipped, "All my economists say 'on hand...', then 'but on the other...”

Jennifer Lee is senior economist at BMO Capital Markets. She tempers the discussion with this: 

"U.S. construction spending rose 0.4%, which was disappointing and April also saw a big downward revision (the 1.8% gain was axed to just 0.9%),” Lee said. 

“The headline May increase was most residential (+0.8%) while nonresidential projects inched up 0.1%. And, the headline increase was spread out between the private sector (all residential) and the public sector. Again, not the ideal mix and given the downward revision to April, suggests some downside risk to the Q2 GDP # that was released last week," Lee said.