Outlays in the construction industry dropped 2.1% in May adding to the 5.9% decline registered since February's peak. Much of the downturn was due to the 4.0% drop in spending on residential as single-family outlays were down 8.5%. However, a little bright spot, spending on multifamily units rose 2.3% and home improvements crept up 0.1%.

 

Total nonresidential spending fell only 0.9% as the private sector posted a 2.4% loss. But public expenditures showed a 1.2% gain thanks to a 2.8% bounce back in highway and street spending and a 1.2% hike in transportation outlays. Education building expenditures also eked out a 0.1% rise.

Overall, the decrease came as a bit of a surprise since housing starts and construction employment are showing growth.

The statement put out by the Wells Fargo Economics Group included, "The negative impacts of the coronavirus lockdowns were once again readily apparent in May construction spending. While many projects were quick to resume, many builders might have become more cautious about starting new projects. Some large municipalities were also slower in allowing construction to resume. The sudden halt to building activity in many areas may have created some unanticipated hurdles to restarting. Multifamily outlays tend to be more volatile on a monthly basis. We expect the trend will weaken this year alongside a COVID- induced spike in apartment vacancies and some softening in rents, (furthermore) the COVID-19 crisis has put the fiscal health of many state and local governments under tremendous pressure. Declines in tax revenues will likely lead to large cutbacks in public construction projects this year and next, absent significant federal relief."