Wells Fargo Weekly Economic Report: Construction Spending as of Friday June 24, 2011

Construction spending rose in April for the second straight month. The 0.4 percent increase in April was largely concentrated residential construction, which increased 3.1 percent. Nonresidential construction fell 0.8 percent for the month due to a 2 percent drop in public nonresidential construction combined with a modest 0.5 percent increase in private nonresidential construction. Home improvement activity increased for the month with a 7.6 percent increase. Public nonresidential construction will continue to weigh on construction spending as all levels of government cutback on expenditures over the next couple of years.

Our outlook continues to signal somewhat stronger construction spending in the second half of the year as home building activity slowly begins to pick back up. Nonresidential construction, however, should remain sluggish as lending for new construction projects remains subdued.

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