July 2014 Economic Indicators
Melanie Garza - Director of Operations
Consumer Confidence Jumps
While GDP in the first quarter suffered its worst setback in five years, shrinking at an annualized rate of 2.9%, consumers are feeling more secure in the U.S. economy. According to The Conference Board, the Consumer Confidence Index climbed to its highest level in six years in June. The June reading rose to 85.2 up from 82.2 in May. It is the highest reported measure since January 2008.
There is no doubt the harsh winter hurt the economy, which likely delayed many purchases. With the milder weather, consumers are back to spending, although it is still less than expected. Consumer spending rose 0.2% in May after no gain in April. Income rose 0.4% after a 0.3% gain in April. Economists had predicted a 0.4% increase in consumer spending. Automotive purchases and other durable goods led the increase. Consumer spending makes up about 70% of the U.S. economic activity.
Stronger job growth and rising incomes are also encouraging signs for consumers. Income rose 0.4% in May and 0.3% in April.
Lynn Franco, Director of Economic Indicators at The Conference Board said: June’s increase was driven primarily by improving current conditions, particularly consumers’ assessment of business conditions. Expectations regarding the short-term outlook for the economy and jobs were moderately more favorable, while income expectations were a bit mixed. Still, the momentum going forward remains quite positive.
Construction Spending Remains Flat
Businesses and contractors are slow to recover from the winter months as construction spending has remained flat in 2014. In May, construction spending grew a mere 0.1% according to the U.S. Census Bureau. Construction activity totaled $958.1 billion in May. The figure is up 6.6% over last year.
Total private construction fell -0.3% in May largely due to few housing starts while non-residential building grew 1.1%. Public construction spending is climbing at a steady pace, growing for three consecutive months. In May, public construction grew 1%. Overall, investments in infrastructure are climbing within the private and public sectors.
In private construction, manufacturing dipped -1.4% in May, but was up 6.3% over 2013. Lodging grew 1.1% in April. Despite a slight decline of -1.6% with office buildings, the sector has surged 18.9% over 2013. Commercial buildings have grown 11.4% from last year, but rose just 0.6% in May.
The government is investing heavily in infrastructure including water supply, sewage and waste disposal, power and transportation. Water supply spending rose 7.9% and sewage spending went up 3.9%, and transportation climbed 3.2%. Public office buildings also grew 2.9%. Projects with education and healthcare are down considerably over 2013, with education -9.4% and healthcare dropping -7.7%, from the previous year.
Economists are hopeful that with increased consumer confidence and improving business conditions, housing and overall construction are expected to regain momentum in the coming months.
Questions? Please contact Melanie Garza at mgarza@teamCOACT.com