U.S construction data shows an unusual rise in spending despite the overall slowdown in the economy. Construction spending surged to an annual rate of 2.2% which is a six and- a- half year high. It is important and interesting to note that the historical average for construction spending is only at 0.44% – from to 1964 up to the present.
Economists and analysts are somewhat baffled by the data and it is shown with a rather skewed prediction of March’s outlay. Housing mortgage statistics is not related to this prediction. It is important to note that these experts place a lot of weight on such data. This is because construction spending represents 20 percent of the overall GDP. It is therefore a useful set of data that economists use to predict the future state of the economy and also explain past performances.
Note that these figures have nothing to do with the debt or housing mortgage of consumers. It was predicted that construction spending would decrease by 0.6%, but this was not the case and was, in effect, revised to be at a 0.5% increase. That is a 1.1% disparity between the prediction and the actual results.
Construction spending consists of 3 important areas of consideration: private residential construction, non-residential construction, and public construction. Non-residential constructions are establishments such as offices, factories, and hotels, while public constructions deal with highways, streets, and public school buildings. The record high on construction outlay is due to increases in the 3 areas aforementioned. It is, specifically, a 0.6 percent increase on private residential constructions and an astounding 3.1 percent in non-residential construction Furthermore, public constructions went on a sharp rise with 3.3 percent. It is important to note that the six-and-a half year high in U.S construction was achieved despite a 3.6 percent decline in federal government spending.
These statistics are baffling analysts because of the weak state of the economy. In fact, the economy is at a 0.7 percent annual rate for the first quarter of this year. Furthermore, consumer spending is down despite cheaper gas prices. It is clear that consumers are not motivated to spend the extra cash at hand on different consumer goods, and would rather pay off their mortgage and debt.