U.S. construction spending falls in June sequentially

The U.S. construction spending dropped in June on sequential terms. Spending fell 1.3 percent, opposite of expectations of a modest rise of 0.4 percent. The biggest miss relative to the forecast was from the sharp decline in public construction spending that fell 5.4 percent led by equal-sized declines in both the residential and non-residential categories. May’s print was upwardly revised, partially explaining the miss relative to the estimate. May’s data was upwardly revised by three-tenths to 0.3 percent at the back of revisions to private construction spending.

Private construction spending came I slightly weaker than anticipated, down 0.1 percent sequentially. Residential private construction spending dropped 0.2 percent on the month, driven by a decline in multi-family spending, a typically volatile category. Non-residential private construction spending was greatly flat and consistent with expectation.

The lower than anticipated construction spending data were mainly driven by weakness in government consumption spending both in residential and non-residential spending. This suggests lower state and local government spending than the assumptions incorporated in the advance estimate of the second quarter GDP, noted Barclays in a research report.

“As a result, we have revised our Q2 GDP tracking lower by two-tenths to 2.4 percent q/q saar, after rounding”, added Barclays.