Economy Watch: Construction Spending Drops

By Dees Stribling, Contributing Editor

The Census Bureau reported on Wednesday that U.S. construction spending during March 2013 was at an annualized rate of $856.7 billion, or 1.7 percent below the revised February figure. Compared with March 2012, the current figure is still 4.8 percent higher.

Spending on private construction was down in March by 0.6 percent compared with February, but that was mainly because of a monthly drop in nonresidential construction of 1.5 percent. Residential construction was at an annualized $294.9 billion in March, or 0.4 percent higher than in February. Public spending dropped considerably as the sequester squeezed March, with the annualized rate of public construction spending coming in at $258.3 billion, or 4.1 percent below the February rate.

Compared with this time last year, private residential construction spending is up 18 percent, and even private nonresidential spending was up 3 percent. Most of the increase in nonresidential construction spending since last year was due to energy projects, including power stations and other electric facilities. Public spending was already on its way down before the sequester, dropping 5.4 percent year-over-year.

Manufacturing still growing, but not by much

The Institute for Supply Management said on Wednesday that the U.S. manufacturing sector continued to expand in April, but barely. The ISM’s PMI came in at 50.7 percent, down from March’s reading of 51.3 percent. The April numbers are the lowest so far in 2013, the organization noted.

The New Orders Index was up in April by 0.9 percentage points to 52.3 percent, while the Production Index increased by 1.3 percentage points to 53.5 percent. Both of those indices kept the overall index from dropping. On the other hand, the Employment Index came in at 50.2 percent, a decrease of 4 percentage points compared to March’s reading, and that was a major factor in pulling the PMI down.

Separately, but also related to industrial production, AutoData Corp reported on Wednesday that U.S. light vehicle sales were at an annualized 14.92 million units in April, up by 6 percent from April 2012, but still representing a 2 percent downtick compared with March 2013.

ADP jobs numbers on low side

Automated Data Processing estimated on Wednesday that the U.S. private sector generated 119,000 new jobs in April, which was fewer than expected. ADP’s report is always the Wednesday before the official Bureau of Labor Statistics numbers on the first Friday of each month, but historically hasn’t predicted the official numbers that closely.

Wall Street, however, seemed to pay attention to the disappointing ADP jobs numbers, as well as the downtick in construction and the weakness in manufacturing, and decided to have a down day. The Dow Jones Industrial Average lost 138.85 points, or 0.94 percent, while the S&P 500 was off 0.93 percent and the Nasdaq declined 0.89 percent.