Construction Booming, ISM Still Healthy

- Construction Spending for March rose .5% versus estimates of a .3% increase and an upwardly revised .5% increase in February.
- ISM Manufacturing for April fell to 53.3 in April versus estimates of 55.0 and a reading of 55.2 in March.
- ISM Prices Paid for April fell to 71.0 versus estimates of 71.2 and a reading of 73.0 in March.

Bottom Line: The rise in construction spending to a record $1.052 trillion annual rate was driven by increased work on new homes, factories and commercial buildings. Construction spending has risen every month since January of last year, the best performance on record. The record pace of new home sales and rising builder backlogs will spur further gains in construction. This should cushion any economic weakness over the coming months. For the first quarter, construction is up 9.3%(YoY).

The modest decline in the ISM should have been anticipated after the GDP report. The production index component of the ISM, a measure of the work being performed, actually rose to 56.7 versus estimates of 56.5. As well, the new export orders component of the index rose to 57.2 from 55.4. Considering the rise in commodity prices during the first part of the year, the decline in the prices paid index is a big positive and corresponds with the drop in the Chicago Purchasing Manager’s prices paid component. The first quarter rise in inventories may limit factory demand over the next few months.