Construction Spending Slowing Due to Housing Slump

Construction spending unexpectedly fell in July. But June's decline was revised higher to help offset the unexpected weakness. July construction spending fell -.4% MoM, the largest monthly drop since January, but July's figure was revised up to +.1% MoM from an originally announced decline of -.3% MoM.

Since July of last year, construction has fallen -2% YoY. All of the decline this past year is due to residential construction falling -15.6% YoY while non-residential (office, hospital, govt) has expanded +13.9% YoY.

Last month residential construction fell the most since January, falling -1.4% MoM. Non-residential, which has been offsetting the weakness of residential construction most of this year, was only able to grow +.6% MoM, offsetting less than half the decline in housing, as homebuilders slow new home starts in an effort to decrease the inventory of unsold homes. Private residential construction fell 1.4% MoM in July, the 17th straight monthly decline.

Public construction grew +.7% MoM in July due to increased spending on schools and hospitals, mainly at the local government level.

Construction is starting off the third quarter as a drag on GDP growth.