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US construction spending posts surprising gain
US construction spending posts surprising 0.8 pct gain in April; spending on home building up
• Jeannine Aversa, AP Economics Writer
• On Monday June 1, 2009, 10:28 am EDT
WASHINGTON (AP) -- Construction spending in the U.S. rose 0.8 percent in April, defying economists' forecasts for a decline.
The unexpected gain -- the most since August -- marked the second straight month that builders boosted spending on construction projects around the country, the Commerce Department reported Monday. Economists were bracing for a 1.2 percent drop in construction spending for April.
Before March's uptick, construction spending had fallen for five straight months.
In an encouraging note, private builders increased spending on housing projects by 0.7 percent, contributing to the overall improvement in April. It marked the first time since August that private home builders boosted such spending. At that time, they increased it 5.5 percent.
Private spending on all other construction projects other than residential ones went up a strong 1.8 percent in April, following a 2.6 percent gain in March. Builders increased spending in April on projects including hotels and motels, factories, power plants and health care facilities. That more than offset reductions in spending on office buildings, amusement and recreation projects and on other projects.
Spending by the government, however, dipped 0.6 percent in April. That refected spending cuts on schools, hospitals and other health-care buildings, and sewer and water-supply projects.
A collapse in the housing market, a credit crunch and a financial crisis helped push the U.S. into a recession.
Federal Reserve Chairman Ben Bernanke has said he hopes the recession, which started in December 2007 and is now the longest since World War II, will end later this year.
Builders have been hard hit. They slashed spending on residential projects in the first quarter at an annualized rate of 38.7 percent, the most since the spring of 1980. Spending on commercial projects was slashed, too.
Economists are hopeful that cutbacks by business in the current April-to-June quarter won't be as deep as they have been. If they are right, the economy shouldn't shrink nearly as much during this quarter as it had in the last six months, analysts say.
WASHINGTON (Reuters) - U.S. homebuilder sentiment jumped to its highest level in eight months in May, a private survey showed on Monday, supporting views that the three-year housing slump might be close to an end.
The National Association of Home Builders/Wells Fargo Housing Market Index rose to 16 from 14 in April, in line with market expectations.
The NAHB attributed the second consecutive monthly increase in the gauge -- which measures builder confidence in the market for newly built, single family homes -- to "the best home buying conditions of a lifetime."
"This continued increase indicates that home builders feel we're at or near the bottom of the market and that positive signs lie ahead for builders and potential home buyers, provided that builder access to production credit significantly improves," said NAHB chief economist David Crowe.
Other housing indicators have recently shown a sharp slowing in the pace of the market's decline, raising optimism a bottom was not too far away.
The collapse of domestic house prices and the subsequent global credit crisis were the main catalysts for the U.S. recession, now in its 17th month.
The report also showed two out of three subindexes of the Housing Market Index rising in May. The current sales conditions gauge climbed two points to 14, while the sales expectations measure for the next six months rose three points to 27. The traffic of prospective buyers index was unchanged at 13 in May.
