Early measures of first-quarter construction activity show weakness compared to late 2004 but a modest improvement relative to the first quarter of 2004. The value of new construction contracts rose 4% from February to March, McGraw-Hill Construction reported today. “Nonresidential building showed signs of strengthening after a weak February, and modest growth was reported for housing and public works. During the first three months of 2005, total construction [was] up 2% relative to the same period a year ago….March brings contracting back to a level slightly above last year's average.” McGraw-Hill breaks construction into residential building, up 7% in the first quarter from the year-ago quarter; nonresidential construction, down 12%; and nonbuilding construction, up 9%. McGraw-Hill counts the full value of new contracts in the month they take effect, providing a leading indicator of construction spending. Coverage equals about 55% of what the Census Bureau reports as construction spending. Neither source estimates “real” (net of inflation) spending.
On Thursday, the Bureau of Economic Analysis (BEA) reported its “advance” estimate of first quarter real gross domestic product (GDP) was up 3.1% in the first quarter from the last quarter of 2004 at a seasonally adjusted annual rate. This was down from a final estimate of 3.8% for fourth-quarter growth but matched the advance estimate for that quarter released in January. BEA noted that on average, the final estimate diverges 0.7 percentage points up or down from the advance estimate, with upward revisions typically a little larger than downward. One component of GDP, real gross private domestic investment in nonresidential structures (including mine shafts and wells), fell 2.6% in the first quarter after rising 2.1% in last year's fourth quarter. This year's total is 1.3% higher than last year's first-quarter total. The price index for private nonresidential structures jumped 10.7%, just below the 10.9% increase in the fourth quarter and more than triple the 3.3% change in the overall GDP price index.