Ahead of the Bell: Construction Spending

Construction spending likely retreated in May following two months of gains.

Economists surveyed by Thomson Financial expect construction spending fell 0.5 percent in May. The Commerce Department will release the report at 8:30 a.m. EDT on Wednesday.

A drop would follow two consecutive increases, including a 0.8 percent rise in construction spending in April that had been the biggest advance since last August. Construction spending had fallen for five consecutive months before the gains in March and April.

Economists expect a slight setback in May as the underlying conditions remain tough in the construction industry.

A collapse in the housing market and the worst financial crisis in seven decades have hurt construction firms and helped push the country into the longest recession since World War II.

Builders slashed spending on residential projects in the first quarter of this year at the steepest pace since the spring of 1980.

The overall economy, as measured by gross domestic product, shrank at an annual rate of 5.5 percent in the first quarter following a 6.3 percent decline in the final three months of last year. That was the worst six-month performance in more than a half-century.

Economists believe the economy's nosedive will slow to a drop of around 2 percent in the April-June quarter before beginning to rebound in the second half of this year.

Los Angeles-based KB Home last week reported a loss of $78.4 million, or $1.03 per share, for the three months ending in May. But company officials said they were expecting a rebound in the fourth quarter that will carry into next year.