Construction Spending Virtually Flat

Unusual volatility is routine for construction spending data where today's data include an unchanged reading for April but a full percentage point upward revision to March, from an initial 0.9 percent fall to a 0.1 percent gain. Yet March and April together are virtually dead flat, reflected in the year-on-year change which is minus 1.2 percent.

Residential investment in the GDP report has contracted for five straight quarters and is not off to a good start in the second quarter either, down 0.6 percent in April for an 11.4 percent year-on-year decline. April's decline is centered in home improvements, down a monthly 2.5 percent, with single-family homes unchanged. Multi-family units are doing better, up 2.3 percent in the month.

Private residential spending has been consistently weak in this report unlike private nonresidential spending which, however, sank 2.9 percent in April and which pulls the on-year rise down to only 0.6 percent. Declines in April were led by manufacturing and commercial building.

What real strength there is in this report has been in public spending which again shows a sweep of gains led by highway & streets and including educational building. Federal spending is up 13.3 percent year-on-year with state & local spending up 15.2 percent.

But public spending can't bail out the residential sector which, despite this year's pivot higher in underlying home sales, continues to extend last year's slump well into this year.