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.
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.
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.
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%.