Construction Ends Four-Month Climb, Down in July
Construction spending in the public and private sectors declined in July, though year-over-year levels continue to show substantial improvement. While public construction has been scaling back for some months, this marks the first contraction of private construction spending since March, and the largest drop in a year.
Both public and private construction spending turned downward in July, ending a four-month climb that has defined improvements in housing and construction this year.
Total construction spending reached a seasonally adjusted annual rate of $834.4 billion, according to the Commerce Department's Sept. 4 report. That figure is down 0.9 percent from the revised June estimate of $842.2 billion, the largest monthly decline this year. Surveys of economists by both Reuters and Bloomberg predicted a rise of 0.4 percent.
The reading is 9.3 percent higher than the July 2011 estimate, widening the margin of year-over-year improvement – June 2012's construction spending level was only 7.0 percent higher than the year before, seasonally adjusted. June's construction levels now represent the peak for the year.
Private construction spending contracted by 1.2 percent, with declines in nearly all measured categories. Residential spending declined 1.6 percent in July, though year-over-year levels increased by 17.6 percent from 2011. Manufacturing, conservation and development, and commercial spending declined the most of the nonresidential niches. Private construction as a whole, however, improved 15.0 percent over July 2011 levels.
The housing industry is still trending upward, as home prices have been increasing for several months. Banks are cautiously releasing distressed homes to the market, at a slower-than-normal pace to keep prices up and move the recovery forward. Uncertainty on looming federal tax and fiscal issues, however, could be impacting the housing and construction market for the first time in a significant way, and not for the better.