Global| Sep 01 2020U.S. Construction Edges Higher as Residential Strength Mostly Offset by Nonresidential Weakness
Summary
• Construction spending ticked up 0.1% in July after four consecutive monthly declines. • Residential jumps 2.1% while public falls 1.3%. • The 5.3% decline in construction since February looks similar to previous recessions. The [...]
• Construction spending ticked up 0.1% in July after four consecutive monthly declines.
• Residential jumps 2.1% while public falls 1.3%.
• The 5.3% decline in construction since February looks similar to previous recessions.
The value of construction put-in-place increased a weaker-than-expected 0.1% in July (-0.1% year-on-year). The Action Economics Forecast Survey anticipated a 1.0% gain. Spending in May and June were revised up to -1.3% and -0.5% respectively from -1.7% and -0.7%. This is the first increase in total construction spending since the February peak in economic and construction activity. Since then construction spending has fallen 5.3%, similar to previous recessions.
In the revised first quarter GDP report released last week private construction spending (nonresidential + residential) subtracted 2.82 percentage points from GDP growth. Today's data points to a slight upward revision to Q2.
Private construction increased 0.6% in July (-1.8% y/y). Residential construction jumped 2.1% (+0.5% y/y) driven by strong gains in both single and multifamily, up 3.1% (-3.2% y/y) and 4.9% (6.0% y/y) respectively. Despite news reports of a home improvement boom, improvements declined 0.5% in July (+3.7% y/y) and are down in five of the last six months. Nonresidential private construction decreased 1.0% in July (-4.3% y/y) with the three of the four largest sectors -- commercial, office and power -- down. Manufacturing showed a small gain.
Public construction fell 1.3% (+5.1% y/y) with nonresidential, which makes up 98% of public construction, down the same amount (+4.4% y/y). The two largest sectors road and school building both dropped by roughly 3.0% in July. If not offset by federal government support, the drop in state and local government revenues resulting from the COVID related collapse hole in economic activity will likely lead to substantial weakness in public construction.
The construction spending figures, some of which date back to 1946 can be found in Haver's USECON database. Mortgage interest rates and loan applications from the Mortgage Bankers Association are in the SURVEYW database and the expectations reading is in the AS1REPNA database.
| Construction Put in Place (SA, %) | Jul | Jun | May | Jul Y/Y | 2019 | 2018 | 2017 |
|---|---|---|---|---|---|---|---|
| Total | 0.1 | -0.5 | -1.3 | -0.1 | 2.4 | 4.2 | 4.6 |
| Private | 0.6 | -0.3 | -2.5 | -1.8 | 0.8 | 4.0 | 6.1 |
| Residential | 2.1 | -0.7 | -4.1 | 0.5 | -2.4 | 3.4 | 12.4 |
| Nonresidential | -1.0 | 0.1 | -0.7 | -4.3 | 4.5 | 4.8 | -0.7 |
| Public | -1.3 | -0.9 | 2.1 | 5.1 | 7.8 | 4.6 | -0.1 |
Gerald D. Cohen
AuthorMore in Author Profile »Gerald Cohen provides strategic vision and leadership of the translational economic research and policy initiatives at the Kenan Institute of Private Enterprise.
He has worked in both the public and private sectors focusing on the intersection between financial markets and economic fundamentals. He was a Senior Economist at Haver Analytics from January 2019 to February 2021. During the Obama Administration Gerald was Deputy Assistant Secretary for Macroeconomic Analysis at the U.S. Department of Treasury where he helped formulate and evaluate the impact of policy proposals on the U.S. economy. Prior to Treasury, he co-managed a global macro fund at Ziff Brothers Investments.
Gerald holds a bachelor’s of science from the Massachusetts Institute of Technology and a Ph.D. in Economics from Harvard University and is a contributing author to 30-Second Money as well as a co-author of Political Cycles and the Macroeconomy.
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