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June Construction Spending Ticks Up; Highways Rise


The U.S. Census Bureau of the Department of Commerce announced that construction spending during June 2015 was estimated at a seasonally adjusted annual rate of $1,064.6 billion, 0.1 percent (±1.5 percent) above the revised May estimate of $1,063.5 billion. The June figure is 12.0 percent (±2.1 percent) above the June 2014 estimate of $950.3 billion.

Highway construction was at a seasonally adjusted annual rate of $90.9 billion, 1.2 percent (±6.3 percent) above the revised May estimate of $89.8 billion.

During the first six months of this year, construction spending amounted to $482.7 billion, 8.0 percent (±1.5 percent) above the $446.8 billion for the same period in 2014.

Spending on private construction was at a seasonally adjusted annual rate of $766.4 billion, 0.5 percent (±0.8 percent) below the revised May estimate of $770.0 billion. Residential construction was at a seasonally adjusted annual rate of $371.6 billion in June, 0.4 percent (±1.3 percent) above the revised May estimate of $370.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $394.8 billion in June, 1.3 percent (±0.8 percent) below the revised May estimate of $400.0 billion.

In June, the estimated seasonally adjusted annual rate of public construction spending was $298.2 billion, 1.6 percent (±2.6 percent) above the revised May estimate of $293.5 billion. Educational construction was at a seasonally adjusted annual rate of $67.2 billion, 0.2 percent (±5.1 percent) above the revised May estimate of $67.1 billion.

According to Patrick Newport, U.S economist for IHS Global Insight, the construction numbers are volatile and vulnerable to large revisions. "For that reason, we prefer to focus on recent trends rather than on the latest data point," he said. "That said, this was an impressive report. even with the nearly flat June reading). Core construction, which currently makes up about 5 percent of GDP, advanced at a 26.1 percent annual rate in the second quarter, a record (the data starts in 1993). Moreover, as a result of data revisions, second quarter real GDP growth will likely be revised up 0.4 percentage points."

With regard to private residential construction, Newport said that excluding improvements, spending increased 0.3 percent. For the quarter, residential spending excluding improvements was up 2.9 percent. "Given recent trends in housing starts and permits, spending should pick up – possibly into the double digits in the third quarter," he noted.

With regard to private nonresidential construction, Newport said that thanks to sizeable data revisions, spending soared to an annualized 39.9 percent in the second quarter (strongest growth quarter on record). "Compared with a year ago, spending was up 9.7 percent, with 6 of 11 categories – lodging (up 27.3 percent), office (up 25.7 percent), commercial (up 13.2 percent), amusement and recreation (up 32.8 percent), transportation (up 15.9 percent), and manufacturing (up 56.8 percent) – posting double-digit year on year gains," he explained.

Public construction, which has been zigzagging around a flat line over the past 12 months, increased 1.6 percent Moreover, thanks to upward data revisions, spending is now trending up.

"Again, an outstanding update, despite June's nearly flat numbers," Newport said.