Demand for New Construction Continues to Decline

Overall construction spending continued to contract in May, falling -.4% MoM. This was a smaller than expected decline, and was further supported by the revision higher in April's data to only a -.1% MoM drop instead of the originally reported drop of -.4% MoM. Over the past year, total construction spending has fallen -6% YoY. Residential construction remains mired in a funk, falling -1.6% MoM for the second month in a row. Residential construction is down -27% YoY. Non-residential construction of schools, office buildings, hospitals and roads, rose +.3%, for the smallest increase since the beginning of the year. But, over the past year, non residential construction has grown by 12% YoY. Both public and private residential construction fell over 1% MoM. Non-residential construction grew twice as fast in the public sector as the private sector in May (+.2% vs +.4% MoM). Public construction projects are becoming increasingly important as the economy slows. Over the past year, private investment has fallen -10% YoY while public spending has grown +5% YoY. With gas taxes income falling on the decline in volume of gasoline burned, the government is currently considering raiding income taxes to cover the shortfall in funds needed to improve the nation's crumbling infrastructure. Federal spending on construction has risen +15% YoY while state and local spending has risen +4.5% YoY.