Spending on building projects in the United States increased more than predicted in May, with private-sector spending on single-family houses increasing quickly.
According to the Census Bureau, construction spending increased 0.9 percent in May compared to April, reaching a seasonally adjusted annual rate of $1.93 trillion. Construction investment is up 2.9 percent in the first five months of 2023 compared to the same period last year.
Analysts had predicted a 0.5 percent increase.
Spending on new single-family homes increased by 1.7 percent, lending credence to the notion that the housing market may have bottomed earlier this year and begun to rebound.
“The lack of existing homes on the market, resilient demand for homes, and falling construction costs are driving homebuilders to start to resume construction,” Bank of America stated in a client note sent prior to the announcement of the May results.
Homeowners have been deterred from selling their houses with lower fixed rates due to the increase in interest rates on home loans over the last year and a half. As a result, there are few existing properties on the market.
Single-family home construction expenditure declined in the first four months of this year and is down 23.7 percent in the first five months compared to the previous year.
Construction spending on multifamily projects, which accounts for around one-third of all construction investment, fell slightly in May but remains substantially over last year's levels. Year to far, multifamily development is up 20.2 percent over the same period last year.
Private nonresidential construction investment dipped 0.3 percent in May, although it is up 20.3 percent this year through the first five months of 2022. Office and hotel spending increased. Manufacturing plant spending increased by 1% year on year, totaling 72.6 percent.
Government spending increased by 0.1 percent, although expenditures on highway and street building declined by 0.4 percent, the largest component of public construction. The second-largest category, educational facilities, remained unchanged throughout the month.