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US DATA: Private Sector Construction Spending Continues To Stagnate

US DATA
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US construction spending continued to stagnate in August, registering a third consecutive contraction on a seasonally-adjusted, annual rate basis (-0.1% after -0.5% prior and -1.1% in June). This was a weak report versus expectations, with August growth registering below the +0.2% expected, and July's figure having been revised down by 0.2pp. The release contributed to today's downward revision in the Atlanta Fed's GDPNow Q3 GDP estimate by 0.54pp to 2.5% (nonresidential fixed investment contributed -0.1pp and residential -0.05pp change).

  • Versus a year earlier, construction spending (all in nominal and not real terms) was up 4.1%, while the first 8 months of the year cumulatively registered 7.6% above the same period in 2023. But momentum is slowing, as evidenced by the most recent monthly contractions, which have brought the 3M/3M figure into negative territory for the first time since December 2022.
  • The slowdown has been led by the private sector, which saw spending contract for a 3rd straight month and the 4th in 6 (that's around three-quarters of total spending - public sector construction spending accounts for just under one-quarter, and while it has slowed recently it's grown 33 months in a row).
  • In turn, residential construction - the single-largest area of spending - led the way lower, falling 0.3% M/M in August after -1.0% in Jul and -3.1% in Jun. This stagnation has been long flagged by softer housing starts and permits, with both multifamily and single-home construction diminishing from recent peaks. This is one of the clearest manifestations of restrictive monetary policy feeding its way into the economy.
  • Interestingly manufacturing construction spending grew in August (+0.2%) despite moribund activity in the sector, with office spending continuing to grow.
  • That may be boosted by onshoring of chip manufacturing (under the CHIPS Act) as well as broader investment in tech, and when considering the public sector construction numbers - which appear largely driven by federal infrastructure spending - government policy appears to be continuing to offset softness in private sector activity.
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US construction spending continued to stagnate in August, registering a third consecutive contraction on a seasonally-adjusted, annual rate basis (-0.1% after -0.5% prior and -1.1% in June). This was a weak report versus expectations, with August growth registering below the +0.2% expected, and July's figure having been revised down by 0.2pp. The release contributed to today's downward revision in the Atlanta Fed's GDPNow Q3 GDP estimate by 0.54pp to 2.5% (nonresidential fixed investment contributed -0.1pp and residential -0.05pp change).

  • Versus a year earlier, construction spending (all in nominal and not real terms) was up 4.1%, while the first 8 months of the year cumulatively registered 7.6% above the same period in 2023. But momentum is slowing, as evidenced by the most recent monthly contractions, which have brought the 3M/3M figure into negative territory for the first time since December 2022.
  • The slowdown has been led by the private sector, which saw spending contract for a 3rd straight month and the 4th in 6 (that's around three-quarters of total spending - public sector construction spending accounts for just under one-quarter, and while it has slowed recently it's grown 33 months in a row).
  • In turn, residential construction - the single-largest area of spending - led the way lower, falling 0.3% M/M in August after -1.0% in Jul and -3.1% in Jun. This stagnation has been long flagged by softer housing starts and permits, with both multifamily and single-home construction diminishing from recent peaks. This is one of the clearest manifestations of restrictive monetary policy feeding its way into the economy.
  • Interestingly manufacturing construction spending grew in August (+0.2%) despite moribund activity in the sector, with office spending continuing to grow.
  • That may be boosted by onshoring of chip manufacturing (under the CHIPS Act) as well as broader investment in tech, and when considering the public sector construction numbers - which appear largely driven by federal infrastructure spending - government policy appears to be continuing to offset softness in private sector activity.