Volatility once again appears in construction spending data as a 1.1 percent June drop was unexpected, coming in far below a plus 0.3 percent consensus gain and Econoday's low estimate of minus 0.3 percent. Part of the surprise is tied to a sharp 9-tenths upward revision to May, now at plus 1.3 percent, which made the comparison for July more difficult.
Residential spending slowed widely in June especially for new multi-family homes, down 2.8 percent in the month, but also for new single-family homes, down 0.4 percent. Home improvements inched 0.1 percent higher in the month.
Private nonresidential spending slipped 0.3 percent with spending on commercial and power projects down while manufacturing, which had been weak, managed a bounce higher. Public spending on educational projects and highways & streets both declined.
Part of the weakness in construction spending is likely tied to shortages of construction workers, especially skilled labor. High prices for construction materials is another likely negative. And for the residential sector, weakness in new construction will continue to limit buyer choices and overall home sales. Still, stepping back and looking at the year-on-year change offers a reminder that construction is overall very strong, with spending up a year-on-year 6.1 percent.
A modest rate of monthly growth is the Econoday consensus for June construction spending, at a 0.3 percent gain vs May's 0.4 percent rise. May's report was led by multi-unit housing, offsetting another choppy performance for the non-residential side of the report.