Construction spending has hit a new benchmark.
In July spending on construction reached its highest volume in over five years, Reuters explained. The increase was fueled by private construction growth and surges in state and local government outlays. This represents the largest jump in spending since May 2012. The boost was felt by all sectors except federal government and follows a 0.9 percent decline in June.
Construction spending jumped 1.8 to an annual rate of $981.31 billion, according to the U.S. Census Bureau. This is the highest level since December 2008.
"It is encouraging to see signs of a broad-based recovery in private construction along with a recovery – at least for now – in public construction investment," Ken Simonson, the Associated General Contractors of America's chief economist, told The Construction Index. "Private non-residential construction should remain strong through the rest of 2014 and beyond, while residential spending is likely to keep growing, though at a more moderate pace. However, funding is still inadequate for needed public infrastructure improvements."
July's spending increase beat Reuter's economists' projection of 1 percent. The jump in spending on state and local government projects – an increase of 3.4 percent – was enough to offset the decline felt in the federal government sector. Spending on federal government projects dropped 1.1 percent.
Another reason for the overall increase in construction spending is the rebounding housing market, following a period of stagnation in 2013. Housing starts are growing, which means good things for people looking for a new home. There will be more on the market soon. Spending on private residential construction experienced a 0.7 percent uptick on the heels of the housing starts increase. A portion of that spending was for home repairs or other improvements.