Construction Spending Continues Decline

August 1, 2016

Construction spending in the U.S. fell month-over-month by 0.6% in June to a seasonally adjusted rate of $1.13 trillion, with sharp declines in spending on public commercial projects and on manufacturing outlays.

Indeed, monthly spending for public commercial construction dropped 14.5% in June to $3 billion, though year-over-year, spending in this category was up 4.6%, according to the latest figures released by the Commerce Department today. Total construction spending for manufacturing dropped 4.5% in June to $71.2 billion, but the drop in this case was part of an overall decline in the sector, year-over-year, of 10.4%.

“On a monthly basis, the numbers are not as bad as they seem, as May’s nonresidential construction spending estimate was revised higher. However, this fails to explain the first year-over-year decline in nearly three years,” said Associated Builders and Contractors, Inc. (ABC) chief economist Anirban Basu. “There are many forces at work, most of them negative, with the noteworthy exception of construction materials prices, which are down on a year-over-year basis. To the extent that savings are being passed along to purchasers of construction services, spending would appear lower in dollar terms than when measured in physical terms such as square footage.”

In private construction, the food and beverage sector continued to feel the heat of reduced demand in June as spending declined 10.4% to $5.96 billion, while construction spending in the sector dropped 18.6% since June 2015, Commerce said.

Construction spending for the automotive service/parts sector was up 7.3% to $2.37 billion in June, a much-needed boost to the year-over-year spending for the category, which was down 25.8%, Commerce said.. The health care sector also lopped off 2% on construction spending in June to $31.5 billion and remains down since June 2015 by 5.9%.

Public construction spending overall fell 0.6% in June to $282.5 billion and is down 6% from June 2015, Commerce said. Spending on sewage and waste disposal dropped 2.7% in June to $21.3 billion, a fall that illustrates the sector’s troubles this past year as it saw a 15% drop in spending from June 2015.

Total federal construction spending slipped 2.3% in June to $22.7 billion, but remains in positive territory (up 1.7%) from June 2015. State and local government construction spending also fell in June, by 0.5% to $259.8 billion and remains down by 6.6% from June 2015.

- Nicholas Stern, editorial associate

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