But Is Up from Last Year

• Total construction spending dropped slightly in April from March, the second straight month of small declines.

• Residential construction spending was essentially flat in April.

• Private nonresidential construction spending dropped 0.3% over the month.

• Lodging and commercial construction spending were drags both month-on-month and year-over-year.

• Public construction spending was down on the month, but still up sharply from last year.

• PNC expects both residential and nonresidential fixed investment to increase in 2024. 

U.S. total construction spending dropped 0.1% in April from March to $2.099 trillion at a seasonally-adjusted annualized rate, from $2.102 trillion (downwardly revised from $2.088 trillion) in March. Both private construction spending (down 0.1%) and public construction spending (down 0.2%) fell slightly over the month. Total construction spending fell 0.2% in March after revisions. Total construction spending was up 10% in April from a year earlier. 

Private residential construction spending increased slightly on the month (up 0.1%), while private nonresidential spending fell 0.3%. The rise in total residential construction spending was driven by a 0.1% increase from new single-family construction, while new multifamily construction spending contracted 0.3%. Over the past year, construction spending rose 20.4% in single-family and 2.3% in multifamily buildings. 

Private nonresidential construction spending dropped in most categories in April, with the exceptions being office (up 0.4%), transportation (up 0.5%), power (up 0.1%), and manufacturing (up 0.9%). The largest month-over-month declines in nonresidential construction spending were in religious (down 3.5%), educational (down 3.1%), and health care (down 2.9%). Compared to April 2023, private nonresidential spending was up more than 8%, with gains in most categories.  

The weakness in lodging and commercial construction spending extended to year-over-year growth. Lodging construction spending dropped both on the month (down 1.6%) and over the past year (down 3.5%), while commercial construction spending contracted on the month (down 1.1%) and remained flat on a year-ago basis. 

Despite the monthly drop in overall public construction spending in April, public construction spending was still up 16.7% over the past year, led by power, public safety, and water supply thanks to federal government support for infrastructure. 

Although construction spending dropped for a second straight month in April, the declines have been very modest, and spending is still up solidly over the past year. PNC expects both residential and nonresidential fixed investment to increase in 2024. Growth in residential investment should pick up as interest rates ease in the second half of 2024 and into next year. There is still a lack of supply for existing single-family homes in the US. Strong demand for housing, along with slightly easing mortgage rates this year, will set up a gradual recovery in homebuilder confidence and residential construction spending. Federal government spending under the bipartisan infrastructure bill, the CHIPS and Science Act, and the Inflation Reduction Act will continue to support nonresidential spending in 2024, despite high borrowing costs.