US construction spending fell 0.1% m/m in February, below the market expectation for a 0.9% gain. The main miss relative to the expectation came in public construction spending, which fell 0.8% and was driven by weakness in nonresidential public construction.
Residential public spending rose 3.4%, more in line with the expectation that total public construction spending would rise 1.2% on the month, but the softness in nonresidential public spending at the state and local level was more than enough to offset this gain.
Elsewhere, private construction spending rose 0.2% on the month, private residential spending fell 0.2%, likely reflecting subdued housing activity and nonresidential private spending rose 0.5%.
Barclays expects residential construction spending to be dampened by transitory weather effects in Q1 15, but looks for this softness to be reversed in later months as activity normalizes with the transition to warmer weather.
"Weak nonresidential construction spending continues to suggest a contraction in structures investment on the quarter. Private residential construction spending through February was broadly consistent with our expectations of residential investment in Q1. Overall, our Q1 GDP tracking estimate remains unchanged at 1.0% after rounding", added Barclays.
