Construction spending inches up

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Total construction spending increased 2.7 percent nationwide during April. At the same time, spending was revised up from 0.2 percent to 0.9 percent for March.

Reed Construction Data Chief Economist Jim Haughey called the news “the strongest construction spending report in many years.”

The April spending gain was much larger than suggested by April’s 24,000 gain in construction job. Haughey pointed out that the April rise was at nearly a 40 percent annual pace which he called “clearly unsustainable,” and the result of “special factors.”

Those temporary positive drivers included the homebuyer tax credit, a shift from unseasonably poor to unseasonably good weather and yet another big monthly jump in residential remodeling spending – expected to level out through the remainder of the year.

Even without those factors, there was a net gain for April construction activity. Some new work was created as suspended projects were restarted during April.

“The spending outlook foresees a further small gain in May and possibly in June followed a pause or brief drop post homebuyer tax credit and then resumed expansion later in 2010,” Haughey wrote in a June 8 update.

The industry research and data analysts at Reed Construction Data also forecast an overall spending drop of 8.9 percent for the remainder of the year followed by a 6.1 percent recovery in 2011.

As is typical, some sectors of the construction industry fared better than others.

The housing and heavy sector outlooks improved slightly from a month ago, but the nonresidential building outlook again worsened, mostly in the education and retail markets, Haughey said.