New Orders, construction take a step back in May

In addition to a "meh" June jobs report, we also got more evidence last week of slower growth for Q2 when we found out construction spending took a step back in May.

Construction spending during May 2024 was estimated at a seasonally adjusted annual rate of $2,139.8 billion, 0.1 percent (±1.0 percent)* below the revised April estimate of $2,142.1 billion. The May figure is 6.4 percent (±1.6 percent) above the May 2023 estimate of $2,011.8 billion. During the first five months of this year, construction spending amounted to $836.3 billion, 8.8 percent (±1.2 percent) above the $768.6 billion for the same period in 2023.

Private Construction Spending on private construction was at a seasonally adjusted annual rate of $1,652.1 billion, 0.3 percent (±0.7 percent)* below the revised April estimate of $1,656.7 billion. Residential construction was at a seasonally adjusted annual rate of $918.2 billion in May, 0.2 percent (±1.3 percent)* below the revised April estimate of $920.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $733.9 billion in May, 0.3 percent (±0.7 percent)* below the revised April estimate of $736.5 billion.

After strong runups over the last year or so since the end of 2022, we've seen some recently leveling for both residential construction, and the sector in general.

In addition, the Census Bureau reported that new orders in manufacturing also dropped.

Summary
New orders for manufactured goods in May, down following three consecutive monthly increases, decreased $3.0 billion or 0.5 percent to $583.1 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent April increase. Shipments, also down following three consecutive monthly increases, decreased $4.2 billion or 0.7 percent to $584.8 billion. This followed a 0.8 percent April increase. Unfilled orders, up forty-six consecutive months, increased $3.1 billion or 0.2 percent to $1,402.8 billion. This followed a 0.1 percent April increase. The unfilled orders-to-shipments ratio was 7.18, up from 7.11 in April. Inventories, up five of the last six months, increased $1.8 billion or 0.2 percent to $860.1 billion. This followed a 0.1 percent April increase. The inventories-to-shipments ratio was 1.47, up from 1.46 in April.

And in Friday's jobs report, a gain in manufacturing jobs for May was revised away, and 8,000 manufacturing jobs were lost on a seasonally-adjusted basis in June. It continued a flatlining in jobs for that sector since late 2022, in contrast with a construction sector that still keeps hiring.

The good news is that wage growth in both manufacturing and construction has been well above the rate of inflation, and the jobs market overall (as I pointed out in this post), but there does seem to be some softness sinking in to both sectors, and it gives more evidence to me that if the Federal Reserve wants to keep the economy nmoving forward, it needs to cuts rates sooner than later.