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Construction spending at highest level in 2.5 years

Construction spending is improving, particularly in the residential real estate sector, which could add to the nation’s growth for the first time since 2005.

residential construction spending

residential construction spending

Overall construction spending improving

According to new data from the U.S. Census Bureau of the Department of Commerce, construction spending during May 2012 rose 0.9 percent to an annual rate of $830.0 billion, the highest level since December 2009. This increase followed an upwardly revised 0.6 percent rise in April.

Construction spending in May is up 7.0 percent above the May 2011 estimate of $775.8 billion, and the Department of Commerce is reporting that during the first five months of 2012, construction spending totaled $310.5 billion, 9.4 percent above the same period in 2011.

Many look to this economic indicator as a sign of health in the overall market, as building implies the ability to get at least some lending, and a sign of buyers, depending on the sector.

Private vs. public construction levels

Spending on private construction was at a seasonally adjusted annual rate of $560.4 billion, 1.6 percent above the revised April estimate of $551.8 billion.

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Residential construction rose 3.0 percent for the month to $261.3 billion in May, and nonresidential construction rose 0.4 percent. Spending on multifamily residential projects jumped 6.3 percent, while investment in single family buildings rose 1.8 percent.

Public construction actually fell 0.4 percent for the month, with educational construction spending down 3.0 percent, and highway construction falling 0.5 percent.

The takeaway

While the American economy has quite a long road ahead toward recovery, spending is a positive sign as investment in the residential sector improves. Real estate has been one of the hardest hit sectors in the economy, and new home construction has been one of the hardest hit sectors within real estate, making spending a promising sign for the market.

Residential construction is expected to be the bright spot in the economy, contributing to the nation’s growth in 2012 for the first time in eight years.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

3 Comments

3 Comments

  1. williamzarmstrong

    July 3, 2012 at 6:49 am

    Mortgage refinancing may be able to offer you benefits such as reducing your monthly payment, lowering the interest expenses you pay over the life of the loan, and/or increasing your cash flow by making more discretionary funds available to you every month. Check 123 Refinance to find refi rates in 3 sec.

  2. Amith

    July 5, 2012 at 1:33 am

    Wonderful, very interesting post thank you..

  3. Pakistan Real Estate

    July 6, 2012 at 2:26 am

    It is really an interesting post. I agree that the rate construction has been increased from past because investors have started to invest in real estate. They buy plots to construct dream homes and residential societies for resale to make their bank accounts greener. Due to the increasing real estate sales the construction rate has boosted up.

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