Construction spending rose 0.9% in May to a seasonally adjusted annual rate of $1.926 trillion, above the revised April estimate of $1.909 trillion. On a year-ago basis, the total value of construction put in place was 2.4% higher in May.

Total private residential (including home improvements) construction spending was up 2.2% in May from April driven by a 1.7% increase in the new single-family segment. Private residential construction was down 11.6% in May from a year ago. Private nonresidential construction fell 0.3% in May and increased 20.5% from a year ago. Total public construction was up by a small 0.1% in May from April.

Despite the sharp increase in borrowing costs in the past year and subsequent big declines in housing starts, permits, and existing-home sales, total construction spending has remained solid. Total construction spending was up 4.6% in May on a year-to-date basis and 2.4% on a year-ago basis. Looking ahead, homebuilding activity should remain solid through 2023 as the number of projects authorized but not started remains near the highest level since 1974. With inflation easing, supply chains improving, the labor market softening, and the Federal Reserve near the end of its hiking cycle, total construction spending should improve in the near term. The Infrastructure Investment and Jobs Act will be a tailwind to public construction spending through 2023.

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