Construction Spending Rises, Pending Home Sales Fall Again, Manufacturing Slow, Prices Paid Rises

- Construction Spending for February rose .8% versus estimates of a .5% increase and a .4% gain in January.
- Pending Home Sales for February fell .8% versus estimates of a .5% decline and an upwardly revised .9% increase in January.
- ISM Manufacturing for March fell to 55.2 versus estimates of 57.7 and a reading of 56.7 in February.
- ISM Prices Paid for March rose to 66.5 versus estimates of 60.9 and a reading of 62.5 in February.

BOTTOM LINE: Construction spending in the US rose more than expected in February as homebuilding remained buoyant and companies spent more on hospitals and power plants, Bloomberg reported. Healthcare and power project construction rose 2.7% and 3.6% respectively. Construction spending will likely decelerate to average levels this year as slowing residential construction is mostly offset by increasing commercial building.

Contracts to buy previously owned US homes declined in February as sellers held out for the same high prices that helped undermine the housing boom, Bloomberg said. Re-sales fell .1% in the South and declined 7.6% in the West. Signings increased 6.8% in the Northeast and were unchanged in the Mid-west. The National Assoc. of Realtor’s is forecasting home prices to rise another 5.8% this year versus a 12.5% gain last year. I continue to believe housing is in the process of slowing to more healthy sustainable levels.

US manufacturing expanded at a slower pace in March as prices increased and new orders fell, suggesting companies are scaling back production in the face of cost pressures, Bloomberg said. The Prices Paid component of the index rose to 66.5 from 62.5 the prior month. The New Orders component of the index fell to 58.4 from 61.9 in February. I continue to believe manufacturing is slowing to average levels. As well, the Prices Paid component should begin decelerating again later this quarter.