Dive Brief:
- July construction spending rose 0.7% to $1.08 trillion — the highest level since May 2008, the Commerce Department reported Tuesday. Reuters called the news "another sign of solid economic momentum at the start of the third quarter."
- Compared with July 2014, spending increased 13.7%. The department also revised June's construction spending numbers up, showing a 0.7% gain rather than the initial 0.1% reported.
- Private nonresidential construction led the month's increase, rising 1.5% to its highest point since October 2008. Overall nonresidential spending inched up 0.5% to $696.1 billion. Private residential spending also rose 1.1% during July, reaching a seven-and-a-half-year high.
Dive Insight:
ABC Chief Economist Anirban Basu attributed the spending surge to strong job growth, a rush of business and recreational travel, the rallying auto sector and low construction material prices.
The disappointing section of the report was public construction spending, which fell 1.0%. State and local government spending saw a 1.1% drop, while outlays on the federal level rose 0.9%.
Basu said of the results, "Among the factors suppressing spending growth is an ongoing lack of coherent federal policy regarding the nation's infrastructure shortfalls and a weak global economy that has limited export growth."
Of the 16 nonresidential sectors, seven saw spending rise and nine saw it fall. The seven with increases include the following sectors: Power, manufacturing, office, conservation and development, religious, communications, and sewage and waste disposal.
The declines were in the following sectors: Education, commercial, healthcare, lodging, water supply, highway and street, amusement and recreation, transportation, and public safety.
Despite the mixed results, analysts anticipate spending will continue to grow in the coming months. “For now, the outlook for nonresidential construction spending remains upbeat, as the positives significantly outweigh the negatives,” Basu said.
