U.S. construction spending comes in flat in April

U.S. construction spending came in flat in April, as compared with expectations of a modest rise of 0.4 percent. The miss relative to forecast was due to unexpected softness in private construction spending, which dropped 1.7 percent sequentially, led by falls in residential as well as non-residential construction spending.

Meanwhile, data on public sector construction spending came in better than expected, with overall spending rising by 4.8 percent sequentially, led by similar increases in both the residential and non-residential sectors.

Residential construction spending has been trending lower for some time, possibly reflecting tepid demand in the midst of deteriorating home affordability from higher interest rates and increasing home prices, said Barclays in a research report.

The three-month annualized rate of construction spending for this sector has been in negative territory since mid-2018. However, there are reasons to believe some of these headwinds might abate, in particular, given the recent easing in mortgage rates and a slight deceleration in the momentum of home prices.

The three-month annualized rate of construction spending for this sector has been in negative territory since mid-2018. But there are reasons to believe some of these headwinds may abate, especially given the recent moderation in mortgage rates and a slight slowing in the momentum of home prices.

“Meanwhile, there were upward revisions to data for February and March, which point to stronger momentum in construction spending leading into Q2”, said Barclays.

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