The dollar value of construction put in place has not seen an increase since August 2024 and broadly reflects the weakness in residential construction. Residential construction has not seen an increase since December. Nonresidential construction has not increased since January. Residential construction has felt the pinch of relatively elevated mortgage rates and high levels of uncertainty on the part of businesses and consumers.

Construction spending is down 0.3 percent in May from April and revised higher to down 0.2 percent in April from March. The Econoday survey of forecasters has a consensus of up 0.1 percent for May. Residential spending is down 0.5 percent from the prior month and nonresidential spending is down 0.2 percent.

Private residential spending is down 0.5 percent in May with spending on new single-family construction down 1.8 percent and multi-unit projects flat. However, spending on home improvements (total private residential less single- and multi-unit spending) is up 0.9 percent. If households are not leaving their current properties to avoid higher housing costs from a new mortgage on a more expensive home, they are reinvesting in where they live.

Private nonresidential spending is down 0.4 percent in May on weakness across categories of construction. One of the mainstays of private nonresidential spending has been investment in manufacturing properties, but demand in this category appears to be exhausted and is down 0.1 percent in May from April and off 3.8 percent from a year ago.

Public construction spending is little changed overall in May at up 0.1 percent. Spending is generally a bit higher in most categories, but the largest one of highway and streets is down 0.3 percent month-over-month and also down 0.3 percent compared to May 2024. The next largest is spending on educational projects and is up 0.2 percent from the prior month, but down 0.3 percent year-over-year.

The May report included annual revisions.

The consensus looks for an increase of 0.1 percent in May after a 0.4 percent decrease in April.

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.