IronPlanet Blog

Construction spending increased in April

Posted by IronPlanet on Jun 1, 2012 2:41:00 AM

Spending on construction rose for the second straight month in April, thanks primarily to an increase in demand for residential housing.

Construction spending jumped by 0.3 percent in the month, matching the gains reported in March, according to the Commerce Department. Experts surveyed by Bloomberg before the report came out predicted a variety of estimates for the month, ranging from a 0.3 percent decrease to a 1.5 percent increase. Compared to 2011, spending was up 6.3 percent.

Two straight months of modest increases have economists optimistic for a stronger recovery in the future, according to the news source.

"There's a modest uptick in demand [for homes]," Michael Gapen, an economist with Barclays, told the news source. "The housing recovery should broaden out this year. We're coming off the bottom."

Much of the increase was due to private homes being built. Private non-residential spending was down slightly, by 0.2 percent, while public construction was down even more sharply with a 1.4 percent decrease. The demand for new homes saved the construction industry from decreasing in the month of April, according to the report.

However, several factors are holding the housing market back from a full recovery. Foreclosures still threaten many homeowners, resulting in a surplus of existing houses on the market, thus presenting the construction of new homes. For example, new home sales rose 3.3 percent in April, but purchases of existing homes were up 3.4 percent. Ideally, construction companies in the home-building business want most home sales to come from brand-new houses.

Contractors should be ready to go to work as the industry continues to recover. One way to prepare for a new project is by investing in the right equipment. The online auction site IronPlanet offers a wide variety of used construction equipment, often at more affordable prices than buying new.

Topics: Construction, Industry Headlines

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