Construction Spending Hits a One-Year Low, MMI Barely Gains

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The Commerce Department said construction spending declined 0.6% to its lowest level since June 2015 after dipping 0.1% in May. June marked the third straight month of declines in outlays.

Two-Month Trial: Metal Buying Outlook

Economists polled by Reuters had forecast construction spending increasing 0.5% in June after a previously reported 0.8% drop in May. Their June estimates were largely based on the government’s assumptions for private residential and nonresidential construction spending in the advance GDP report.

Construction_Chart_August_2016_FNL

Weak nonresidential spending and a pullback in home building were credited for the drop. Our Construction MMI still increased from 66 to 67 this month, largely based on jumps in still-in-demand steel products such as rebar and H-beams. Those prices made up for steep drops elsewhere to eke out the 1.5% increase.

However, weak U.S. economic growth seems to have finally hit the construction industry, previously a bright spot of the U.S. economy. A third straight month of declining construction spending will certainly be reflected soon in overall purchasing.

“It’s a deceleration process after two years of fairly decent growth,” Robert Murray, chief economist of Dodge Data & Analytics, told Reuters.

Compare Prices With The July 2016 MMI Report

The slowdown can be seen in construction payrolls. Adjusted for seasonal fluctuations, the number of people working in construction has dropped by 22,000 since hitting a post-recession peak in March of about 6.7 million.

Actual Construction Product Prices

Chinese rebar increased to $379.32 a metric ton this month from $357.66 per mt in July, a jump of 6%. Chinese H-beam steel increased to $388.35/mt this month from $339.62/mt in July, an increase of 14.3%. Both of these prices are affected by U.S. tariffs on Chinese steel. A more representative price, Chinese aluminum bar, fell to $2,001.96/mt this month from $2,051.27/mt in July, a drop of 2.4%.

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