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Construction Spending: Surprise Weakness, Trend Poor

August 2, 2017

Bottom Line: Sharply below consensus for June, construction spending has fallen 2.6% annualized over the last 6 months, led by declines in the private and public non-residential sectors. This compares to total spending growth over the last 12 months of 1.6% and 9.2% in 2016. While still stronger than other sectors over the last 6- and 12-months, residential construction has contracted 5.4% annualized over the last 3 months. Overall, trends are towards slower construction spending growth with slowness in the residential sector now adding to continued weakness in non-residential and public sector construction.

Construction Spending FELL by 1.3% in June, compared with market expectations for an increase of 0.4%.The May estimate was revised modestly higher from 0.0% to 0.3%, while the April, estimate was revised moderately lower from -0.7% to -1.8%. Construction spending is now 1.6% ABOVE its year ago level but still 2.7% below its March 2006 peak.

Residential Construction FELL by 0.2%, Homebuilding is now 9.2% ABOVE its year ago level.

Nonresidential Construction ROSE by 0.1%. Nonresidential construction growth is now 1.1% ABOVE its year ago level.

Public Construction FELL by 5.4%, and is now 9.5% BELOW its year ago level.

Article by Contingent Macro Advisors