Residential Construction Spending increased in March, Non-Residential and Public Spending Decreased

The Census Bureau reported that overall construction spending decreased in March:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during March 2013 was estimated at a seasonally adjusted annual rate of $856.7 billion, 1.7 percent below the revised February estimate of $871.2 billion. The March figure is 4.8 percent above the March 2012 estimate of $817.8 billion.

Both private construction and public construction spending decreased (residential increased, non-residential decreased):

Spending on private construction was at a seasonally adjusted annual rate of $598.4 billion, 0.6 percent below the revised February estimate of $602.0 billion. Residential construction was at a seasonally adjusted annual rate of $294.9 billion in March, 0.4 percent above the revised February estimate of $293.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $303.5 billion in March, 1.5 percent below the revised February estimate of $308.2 billion. ...

In March, the estimated seasonally adjusted annual rate of public construction spending was $258.3 billion, 4.1 percent below the revised February estimate of $269.2 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 56% below the peak in early 2006, and up 33% from the post-bubble low. Non-residential spending is 27% below the peak in January 2008, and up about 34% from the recent low.

Public construction spending is now 21% below the peak in March 2009 and at the lowest level since 2006 (not inflation adjusted).

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 18%. Non-residential spending is up 3% year-over-year mostly due to energy spending (power and electric). Public spending is down 5.4% year-over-year.

A few key themes:
1) Private residential construction is usually the largest category for construction spending, but there was a huge collapse in spending following the housing bubble (as expected).  Private residential is now about even with private non-residential, and residential will probably be the largest category of construction spending in 2013.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time, mostly related to energy and power - but the key sectors of office, retail and hotels are still at very low levels.

3) Public construction spending has declined to 2006 levels (not adjusted for inflation).  This has been a drag on the economy for 4 years.  In real terms, this is the lowest level of public construction spending since February 2001. 

ISM Manufacturing index declines in April to 50.7

The ISM manufacturing index indicated expansion in April. The PMI was at 50.7% in April, down from 51.3% in March. The employment index was at 50.2%, down from 54.2%, and the new orders index was at 52.3%, up from 51.4% in March.

From the Institute for Supply Management: April 2013 Manufacturing ISM Report On Business®

Economic activity in the manufacturing sector expanded in April for the fifth consecutive month, and the overall economy grew for the 47th consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

The report was issued today by Bradley J. Holcomb, CPSM, CPSD, chair of the Institute for Supply Management™ Manufacturing Business Survey Committee. "The PMI™ registered 50.7 percent, a decrease of 0.6 percentage point from March's reading of 51.3 percent, indicating expansion in manufacturing for the fifth consecutive month, but at the lowest rate of the year. The New Orders Index increased in April by 0.9 percentage point to 52.3 percent, and the Production Index increased by 1.3 percentage points to 53.5 percent. The Employment Index registered 50.2 percent, a decrease of 4 percentage points compared to March's reading of 54.2 percent. The Prices Index registered 50 percent, decreasing 4.5 percentage points from March, indicating that overall raw materials prices remained unchanged from last month. Comments from the panel indicate a range of strong/steady growth, to flat/declining volumes, depending upon the particular industry."

Click on graph for larger image.

Here is a long term graph of the ISM manufacturing index.

This was below expectations of 51.0% and suggests manufacturing expanded at a slower pace in April.

ADP: Private Employment increased 119,000 in April

From ADP:

Private sector employment increased by 119,000 jobs from March to April, according to the April ADP National Employment Report®, which is produced by ADP® ... in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The March report, which reported job gains of 158,000, was revised downward to 131,000 jobs.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth appears to be slowing in response to very significant fiscal headwinds. Tax increases and government spending cuts are beginning to hit the job market. Job growth has slowed across all industries and most significantly among companies that employ between 20 and 499 workers.”

This was below the consensus forecast for 155,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 153,000 payroll jobs in April, on a seasonally adjusted (SA) basis.

Note: ADP hasn't been very useful in predicting the BLS report.

MBA: Refinance Mortgage Applications Increase, Purchase Applications Decrease

From the MBA: Mortgage Refinance Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 3 percent from the previous week and is at its highest level since the week ending January 18, 2013. The seasonally adjusted Purchase Index decreased 1.4 percent from one week earlier.
...
The HARP share of refinance applications increased from 32 percent last week to 34 percent this week, the highest level since MBA began tracking HARP applications in February 2012.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) decreased to 3.60 percent, the lowest rate since December 2012, from 3.65 percent, with points decreasing to 0.30 from 0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the refinance index.

There has been a sustained refinance boom for over a year.

According to the MBA, the HARP program is contributing significantly to the current level of refis and is at the highest percentage of refinances since the MBA started tracking HARP.  Note: HARP is a success story.

The second graph shows the MBA mortgage purchase index.  The 4-week average of the purchase index has generally been trending up over the last year, and even with the slight decline in the weekly index, the 4-week average of the purchase index is at the highest level since May 2010.