Monday, June 1, 2009

Construction spending better than expected

Construction spending in April was stronger than expected. Contrary to widespread expectations—including my own—nonresidential construction spending has not plunged. Instead it has increased for the past four months. This adds to the evidence that the economy has bottomed.


Gene Prescott said...

Residential construction seems to still be low. A large bank, which had previously indicated reasonable line of credit would be renewed, has now 'adjusted' their proposal so that they would participate at 55% of cost on specs; 70% on pre-solds (normally 85%). This effectively keeps new starts on the sidelines.

Scott Grannis said...

Residential construction is indeed very low, and will probably take some time to recover. But it's unlikely to be a drag on growth, and that is good news.

Gene Prescott said...


....and that is good news"

I agree, but there is now more good news being held hostage by current bank lending (or lack of lending) to home builders.

Scott Grannis said...

Well, sooner or later the bank lending problem will solve itself. The profit motive is pretty powerful.