Construction Spending Sinks to 7-Month Low

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While most of the stories coming out of the U.S. economy have been tremendously positive, there’s one area that seems to be suffering: Construction.

Construction spending fell to a seven-month low in March, according to recent data from the Commerce Department.

In a May 1 article from Reuters, it was reported that construction spending dropped 1.7 percent to an annual rate of $856.72 – the lowest level since August. This came as an unpleasant surprise to economists, as they had originally predicted that construction spending would rise 0.7 percent in March. Unfortunately, that didn’t happen, as construction in March was held back due to a 4.1 percent drop in public construction projects. This decline was the largest seen since March 2002.

construction of a homePublic construction wasn’t the only sector to fall short. Reuters reports that outlays on federal government projects decreased 1.7 percent. State and local construction spending also fell, dropping 4.3 percent. This was also the largest drop seen since March 2002.

Spending on private construction fell slightly, decreasing 0.6 percent. Interestingly, residential construction spending actually increased 0.4 percent; however, the gain was offset by a 1.5 percent loss in n spending on private nonresidential structures.

Due to these underwhelming reports, the government’s estimate of moderate growth in the first quarter of 2013 will likely need revision. This could indicate that a tighter fiscal policy is beginning to take its toll, Reuters says.

The guys from The Motley Fool offer some additional insight into this topic:

(Please note this video represents the opinions of the hosts and does not necessarily represent the beliefs of ForTheBestRate.com or their affiliates).

Despite these setbacks, there are other rays of light that continue to shine through the real estate market. Even though residential construction didn’t get far off the ground, home price appreciation has accelerating across the nation, consumers are more confident about buying, foreclosure rates are dropping, and pending home sales recently increased to the highest level since 2010. So while new developments may be slow to show up, existing homes will likely continue to be scooped up quickly. After all, buyer demand is at a level not seen in several years and with home prices and interest rates remaining reasonable, now is a very popular time to buy.

Nat Criss is one of the owners of ForTheBestRate.com. Nat has an extensive background in mortgage finance, real estate, and online marketing. Nat was previously the Marketing Director for AAXA Discount Mortgage, a mortgage company which conducted business in 26 states, and currently helps run CMG Equities, LLC and ILM Marketing. My Google Profile+

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