As Headwinds Persist

• The value of construction put in place in the U.S. rose a small 0.2% in April from March.
• Total private construction in April was 0.5% above the revised March estimate.
• Total public construction fell 0.7% in April from March.
• Construction will continue to contribute to U.S. economic growth through 2022.

Construction spending, also known as construction put in place, rose a small 0.2% in April from March, following an upwardly-revised 0.3% increase in March, according to the Census Bureau. April’s increase was lower than the consensus and PNC’s expectation for an increase of 0.5%. Consumption spending growth in April was the slowest since July 2021.

Total private construction rose 0.5% on the month. Private residential construction spending was up 0.9% in April from March, while private nonresidential spending fell 0.2%. Total public construction spending fell 0.7%. Residential public construction fell 1.2% in April from March while nonresidential public construction fell 0.7%.

On a year-ago basis, total construction spending was up a solid 12.3% in April. This included a 15.3% annual increase for total private construction and a 1.8% annual increase for total public construction.

Despite the slowing in construction spending growth in April, construction will continue to contribute to U.S. economic growth through 2022. Private residential construction spending has increased in every month this year and should continue to improve through the year thanks to a record backlog of houses still to be constructed. New residential construction data for April from the Census Bureau showed that the number of houses approved for construction that are yet to be started rose 0.7% to a record-high 288,000. Notwithstanding, builder sentiment has declined in recent months. The National Association of Home Builders (NAHB) index fell in May to the lowest level since June 2020 as the construction sector grapples with sky-high input costs, labor shortages and rising interest rates. Residential construction spending should remain solid in the second half of the year and public spending will be boosted over the next few years by government spending on infrastructure projects.

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