The total dollar value of construction put in place is up 0.9 percent in May from April after up 0.4 percent in April from March. The increase is above the consensus of up 0.5 percent in the Econoday survey of forecasters. The rise is due to a 2.1 percent increase in spending on residential construction in May while nonresidential construction is down 0.2 percent month-over-month.

The report includes revisions in seasonally adjusted data back through January 2016.

Residential construction is higher on a 1.7 percent increase in spending on single-family home construction in May from April. The last time there was an increase was up 0.4 percent in January, the only other rise in a string of declines between June 2022 and April 2023. The May increase is the largest since up 2.9 percent in May 2022. Lack of supply in the existing home market is giving homebuilders an incentive for new construction in this segment of the housing market. Multi-unit home construction spending is down 0.1 percent in May from April and the first decline since down 0.3 percent in July 2022. Spending on multi-unit homes has been solid as the more affordable option for those looking to switch from renting to buying while rents have escalated sharply. Spending on home renovations and repairs private residential construction spending less single- and multi-unit spending is up 3.4 percent in May from April. Current homeowners are investing in their properties rather than looking to up- or downgrade to another home while they have exceptionally low mortgage rates.

The dip in nonresidential spending reflects modest broad-based softness in most categories. However, spending on manufacturing continues to rise and is up 1.0 percent in May from April, and 76.3 percent higher than a year ago.

Construction spending for May is expected to rise a further 0.5 percent following April's strong 1.2 percent increase that saw a rise in residential spending for the first time since May last year.

The dollar value of new construction activity on residential, non-residential, and public projects. Data are available in nominal and real (inflation-adjusted) dollars.

Construction spending has a direct bearing on stocks, bonds and commodities because it is a part of the economy that is affected by interest rates, business cash flow and even federal fiscal policy. In a more specific sense, trends in the construction data carry valuable clues for the stocks of home builders and large-scale construction contractors. Commodity prices such as lumber are also very sensitive to housing industry trends.

Businesses only put money into the construction of new factories or offices when they are confident that demand is strong enough to justify the expansion. The same goes for individuals making the investment in a home.

A portion of construction spending is related to government projects such as education buildings as well a highways and streets. While investors are more concerned with private construction spending, the government projects put money in the hands of laborers who then have more money to spend on goods and services.

On a technical note, construction outlays for private residential, private nonresidential, and government are key inputs into three components of GDP--residential investment, nonresidential structures investment, and the structures portion of government expenditures.

That is why construction spending is a good indicator of the economy's momentum.