Economy Watch: Construction Spending, Mortgage Delinquencies Advance in April; ISM Manufacturing Index Up in May

U.S. construction spending during April was 0.2 percent above the March rate. U.S.mortgages were 5.6 percent delinquent in April, up from 5.52 percent in March. The ISM Manufacturing Index in May increased by 0.5 percentage points from April.

The Census Bureau reported on Monday that U.S. construction spending during April, both public and private, came in at an annualized rate of $953.5 billion, or 0.2 percent above the March rate. The April 2014 figure is also 8.6 percent above the April 2013 rate of $878.4 billion.

Spending on private construction projects was at an annualized rate of $686.5 billion, nearly the same as in March, but up 11.7 percent for the year. Public construction, on the other hand, actually inched up in April. The annualized rate of public construction spending was $267 billion, 0.8 percent above the revised March rate, and 1.2 percent more than a year ago.

Private residential construction spending didn’t budge month-over-month in April, but it is up 17.2 percent compared with last year. Much of that is new multi-family construction spending, which is up 31.2 percent year over year, but new single-family construction spending is no slacker, up 14.5 percent for the year. Other kinds of construction spending that have risen significantly since last year include lodging (up 16.9 percent) and office (up 20 percent).

Mortgage Delinquencies Edge Up in April, Says Black Knight

Black Knight Financial Services (formerly the LPS Data & Analytics division) released its April Mortgage Monitor report on Monday. The company notes that 5.6 percent of U.S.mortgages were delinquent in April, up from 5.52 percent in March. It also reports that 2 percent of mortgages were in the foreclosure process, a drop from 3.2 percent in April 2013. That means a total of 7.6 percent of mortgages are either delinquent or in foreclosure.

Black Knight also reported that, as of April, about 2 million modified mortgages are facing interest rate resets in the near future. One of the problems with that is that more than 40 percent of those loan modifications are currently underwater.

“We have seen a continual reduction in the number of underwater borrowers at the national level for some time now, but modified loans show a different picture,” Kostya Gradushy, Black Knight’s manager of Loan Data and Customer Analytics, said in a statement. “While the national negative equity rate as of April stands at 9.4 percent of active mortgages, the share of underwater modified loans facing interest rate resets is much higher — more than 40 percent. In addition, another 18 percent of modified borrowers have 9 percent equity or less in their homes.”

ISM Manufacturing Index Up in May

The Institute for Supply Management reported on Monday in its Manufacturing ISM Report on Business that the May PMI came in at 54.9 percent, an increase of 0.5 percentage points from April, meaning that the manufacturing sector is still expanding. The New Orders Index registered 56.9 percent, an increase of 1.8 percentage points from April, meaning there’s been growth in new orders for the 12th consecutive month. The Production Index registered 61 percent, 5.3 percentage points above the April reading of 55.7 percent.

The survey respondents were also optimistic about employment in May, but not as much as the month before. Employment grew for the 11th consecutive month, registering 52.8 percent, a decrease of 1.9 percentage points below April’s reading of 54.7 percent.

Wall Street had a near-replay of Friday on Monday, ending mixed. The Dow Jones Industrial Average gained 26.5 points, or 0.2 percent, and the S&P 500 advanced 0.1 percent. The Nasdaq dropped 0.1 percent, just as it did on Friday.