US construction spending rises 0.8 percent in May

U.S. construction spending posted a solid gain in May, pushing total activity to the highest point since the fall of 2008, with the strength led by a big jump in nonresidential projects.

Total construction spending increased 0.8 percent in May, following an even bigger 2.1 percent advance in April, the Commerce Department reported Wednesday. The gains pushed totaled activity to a seasonally adjusted annual rate of $1.04 trillion, the highest level since October 2008.

All major categories showed increases in May, led by a 1.5 percent rise in non-residential building, which reflected increases in spending on hotels, manufacturing facilities and amusement parks. Residential construction was up a more modest 0.3 percent. Spending on government projects rose 0.7 percent.

Construction activity is expected to be a source of strength this year, helping the economy to accelerate after a soft patch at the beginning of the year.

The 0.3 percent rise in residential building matched the April gain and was led by a 0.9 percent rise in spending on renovation projects. Spending on single-family homes was flat, while spending on apartment projects edged up 0.2 percent in May.

The 1.5 percent rise in non-residential construction followed sizable gains of 4 percent in April and 3.3 percent in March.
The 0.7 percent advance in spending on government projects was led by a 6.3 percent surge at the federal level and a smaller 0.2 percent increase in spending on state and local building projects.

The economy went into reverse during the January-March quarter, shrinking at an annual rate of 0.2 percent, as consumer spending, construction and other economic activities were hurt by the unusually severe winter. But economists believe growth posted a solid rebound in the April-June quarter, predicting the economy expanded at an annual rate of 2 percent or better. They are forecasting even faster growth of around 3 percent in the second half of the year.

Both the commercial and residential real estate markets appear stronger this year.