Construction Spending for April is up 1.8% from March and up 6.6% Year-to-date (YTD) from 2017. Both Feb. and Mar. were revised up slightly.
YTD$ Jan-Apr 2018 vs 2017 > Residential +8.7%, Nonresidential Buildings +6.0%, Nonbuilding Infrastructure +3.7%. Public +7.6%, Private +6.3%.
Spending in current $ has reached a new high of $1,310 billion surpassing the previous high spending from 2006. But after adjusting for inflation, constant $ shows volume is still 13% below the 2005 peak.
Census is reporting a 1.8% mo/mo gain from March. I am not seeing such a huge jump in April construction spending over March. My data shows very slight growth from Mar to Apr, possibly because my SAAR factor produces a much higher SAAR for March than the Census factor. The Census factor, which appears unusually low in March, lowers March (to a decline) and increases April growth.
Year-to-date indicators are often a better indicator of a growth trend than mo/mo comparisons. But, YTD can be deceiving. When both years being compared have similar slope to spending growth, YTD works well. But if one year has a declining slope and the other year an increasing slope, YTD values can vary widely from expected annual total yr/yr growth.
For example, Manufacturing shows YTD growth from 2017 is down 4.1% through April. Monthly spending in 2017 trended down most of the year starting at the highest, $74bil in Q1 2017, dipping as low as $61bil in Dec. For 2018, just the opposite trend is taking place. 2018 started in Jan at a rate of $65bil and is projected to finish the year at $72bil.
This means YTD comparisons for 2018 vs 2017 will start out at the lowest percent change for the year (-4.1%) and finish with 2018 values increasing and 2017 values decreasing. By the 4th quarter the mo$2018/mo$2017 could reach +20%. That diverging trend will continually move the average YTD up such that, for the first half of the year, YTD gives no clear indication of the expected annual performance.
Similar patterns, or at least partially similar patterns, can be found in Office, Educational, Power and Amusement/Recreation.
Overall, this indicates construction spending will experience an improving picture through the year. I’m predicting total YTD performance will increase every month into the 4th quarter. From April to September 2017, total monthly spending was declining. In 2018, for this same period, spending is predicted to increase every month. This will result in rapidly increasing YTD percents during this period. YTD will increase from 6.6% in April to 9% in the 3rd quarter. Even if spending were to realize no additional gains in 2018, the YTD% would still increase from now into the 4th quarter, because 2017 values declined.
The latest data comes in as expected, so does not appreciably change my outlook. I’m still forecasting 8% to 10% growth across all sectors and I expect 2018 will reach a total $1,350 billion in spending.
The outlook is particularly strong for Residential, Educational, Amusement, Office and Transportation. Transportation may exceeding 25% growth. Highway/Bridge and Healthcare growth will be limited.
MORE TO COME