U.S. construction spending flat in July, residential investment likely to resume growth in H2

U.S. construction spending remained flat in July. It came in below consensus projections. However, June’s data was upwardly revised, painting a better picture of the sector than anticipated earlier. The June’s figure was strongly revised upward to 0.9 percent in sequential terms from the initial reading of a decline of 0.6 percent. Also, non-residential construction spending for the second quarter overall looks considerably stronger than in prior estimates, noted Barclays in a research note.

July’s report indicated that single family residential construction dropped 0.2 percent month-on-month, whereas multi-family residential construction fell 0.6 percent. However, the drop was mitigated by a strong rise in home improvement spending. Private non-residential construction rose 1.7 percent in sequential terms. June’s figure was revised up, implying a more buoyant picture than reported initially.

The public sector construction was the most subdued element, falling 3.1 percent. It dropped strongly at both the federal level and state and local level. Non-residential spending in the public sector was especially weak. Overall, the construction spending report for July implies that private investment improved a bit during the beginning of the third quarter, thanks to spending on home improvements and non-residential sector. However, government investment spending decelerated considerably.

Residential investment in the U.S. is expected to resume growing in the second half of 2016 as the drag from single family and multifamily home construction wanes, said Barclays. Also, upside risks to non-residential private investment are anticipated.