Construction spending fell 1.3% in June 2017 to an estimated seasonally adjusted annual rate of $1,205.8 billion, according to the latest report from the U.S. Census Bureau. May’s estimate was revised down from $1,230.1 billion to $1,221.6 billion and April’s estimate was revised back down from $1,230.4 billion to $1,217.7 billion. Construction spending is the lowest it has been since September 2016.
Ever since construction spending peaked in March at $1,239.6 billion, construction spending has been up and down. June’s estimate is only up 1.6% from a year ago with the June 2016 estimate at $1,186.4 billion.
Total construction put-in-place for the first half of 2017 totaled $577.0 billion. This is up 4.8% compared to the $550.5 billion spent between January and June 2016.
Private construction spending for June was at a seasonally adjusted annual rate of $940.7 billion. This is 0.1% below May’s estimate which was revised down from $943.2 billion to $941.3 billion. April’s estimate was also revised down from $949.3 billion to $942.6 billion. Total private construction is up 5.3% from the $893.6 billion estimate for June 2016.
Private nonresidential construction spending was at a seasonally adjusted annual rate of $437.8 billion in June. This is 0.1% higher than May’s estimate which was revised up from $433.6 billion to $437.3 billion. April’s private nonresidential estimate was revised down from $436.7 billion to $434.8 billion.
Private office and commercial construction have seen the most growth over the past year. Office is up 12.6% from a year ago and commercial is up 13.8% over June 2016. Private transportation spending has seen the biggest drop from June 2016, falling 17.8%.
Private residential construction was down 0.2% in June to a seasonally adjusted annual rate of $502.9 billion. May’s estimate was revised down from $509.6 billion to $504.0 billion and April’s estimate was revised down again from $512.7 billion to 507.8 billion. Private residential construction is up 9.2% from a year ago. The June 2016 estimate was $460.3 billion for private residential.
The seasonally adjusted annual rate for public construction spending was estimated at $265.1 billion for June. This is the lowest it has been since February 2014 when it hit $263.4 billion. This is 5.4% lower than May’s estimate which was revised down from $286.9 billion to $280.3 billion. April’s public construction spending estimate was revised down from $281.0 billion to $275.1 billion. Public construction spending is down 9.5% from a year ago. The June 2016 estimate for public construction was $292.8 billion.
Public construction spending is down in every sector from the previous month with commercial construction seeing the biggest drop at a 20.1% below May’s estimate. Healthcare is the only sector that is up from a year ago with a 9.1% increase. Public construction spending on power projects has dropped a whopping 50.5% from June 2016.
ConstructConnect’s Chief Economist Alex Carrick had the following observations regarding the latest construction spending report:
The Census Bureau’s put-in-place construction numbers have been misfiring over the last several months. As reported today for June, seasonally adjusted (SA) total on-site investment was -1.3% month to month (m/m), with residential -0.3% m/m and nonresidential -2.0% m/m.
Total construction’s nominal value of $1.206 trillion in June was the lowest it’s been since September 2016 ($1.196 trillion).
Nonresidential construction’s value in the latest month dropped below $700 billion for the first time since January 2016 ($690 billion), a year and a half ago.
2017’s half-year figure for total put-in-place construction is still solidly positive, +4.8%. All the strength, however, has been provided by residential activity. Homebuilding’s SA volume, on average, for January through June of this year is +11.0% compared with the first six months of last year.
Nonresidential put-in-place construction on the same basis is only +0.8%.
Year-to-date (ytd) investment has been +6.7% by the private sector but -5.0% by the public sector.
Most concerning, however, is the way in which latest volume levels have been tailing off for some key sub-categories. For example, while lodging is +7.2% SA on average ytd, it is -2.3% in the latest three months versus the prior three months. Office building construction is +14.4% ytd, but -2.6% more recently.
Educational construction is +2.2% year to date, but -17.7% in the latest block of three months.
Two other categories are down ytd but are even more significantly in decline on a latest-three-months over prior-three-months basis: highways and streets (-3.6% ytd but -21.6% more recently) and manufacturing (-7.8% ytd but -13.1% more recently).
On the upside, is a surprising category, given all the turmoil that has been evident in Washington concerning government involvement, and more specifically financing, in this area − health care (+1.6% ytd but +4.5% more recently).
The U.S. jobs market has become exceptionally tight and stock market indices are continuing to set new all-time highs. Word has gone out that there is a great deal to like about the U.S. economy, but it seems that owners contemplating expansion projects have been left off the email trail.