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Declines In Construction Spending Could Slow Overall U.S. Economic Growth

Construction spending in the U.S. construction fell in August, after a slight increase in July.  The 0.8 percent decline was the second fall off in the last three months and weakness was spread across all three major sectors—residential, non-residential and government projects, reports The Associated Press.

Non-residential construction took the biggest hit during August, falling off 1.4 percent, followed by government spending, which dropped .9 percent in the eight month of the year.  The government added to the good news with revised estimates for spending for the last two months both taking downward revisions.

The weakness was apparent in all sectors. Housing construction declined 0.1 percent, reflecting a big drop in spending on remodeling. Non-residential construction fell 1.4 percent while spending on government projects dropped 0.9 percent.

Overall construction spending was at $960.96 billion in August, which is a five percent uptick from a year ago.  It is, however, far enough south that some analysts are revising their predictions and questioning expectations from early 2014 that construction would be able to support economic growth during the second half of the year.

Housing construction brought in $351.7 billion in August, a 3.7 percent increase from last year.

Spending on non-residential projects totaled $333.3 billion, which is a  9.2 percent improvement from the same time period last year. However,  in August, spending on office buildings, shopping centers and hospital construction all declined from July.

Effecting the overall picture is a U.S. economy that for all intents and purposes went into reverse in the first three months of the year, shrinking at an annual rate of 2.1 percent, in part because of weakness in construction.

The economy rebounded in the April-June quarter growing at its fastest rate in two years.  That rebound pushed residential construction, which picked up to by almost 9 percent during the spring.

The hope among economists is that construction will continue to grow in the July-September quarter and that will provide support for the overall economy.

 

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