US construction spending unchanged in July

WASHINGTON – U.S. construction spending was unchanged in July as weakness in spending on government projects offset gains in home building and the strongest month for non-residential construction on record.

Construction spending was flat in July but declines in May and June were revised to show slight gains, the Commerce Department reported Thursday. Spending in June is now reported up 0.9 per cent while May showed an increase of 0.1 per cent.

The advance in July was led by a 1.7 per cent increase in spending on non-residential projects which rose to an all-time high of $429.5 billion at a seasonally adjusted annual rate. Office building and shopping centres both showed solid gains.

Residential construction increased 0.3 per cent in July but spending on government projects fell 3.1 per cent, the fourth drop in the past five months.

Overall construction spending stood at a seasonally adjusted annual rate of $1.15 trillion in July, up a modest 1.5 per cent from a year ago.

Residential construction, which had fallen for three straight months, rebounded slightly in July on the strength of increased spending on home remodeling projects. Spending on single-family home construction was down 0.2 per cent while spending on apartment construction dropped 0.6 per cent. Total home construction was up 1.9 per cent from a year ago.

Non-residential construction has been up sharply in four of the past five months with July activity 7.1 per cent higher than a year ago. In addition to solid gains in office and shopping centre work, there were also strong increases in manufacturing and power plant construction. But spending on construction of hotels and motels was down 1.2 per cent.

The decline in government spending reflected a 3.3 per cent fall in spending at the federal level and a 3.1 per cent drop in state and local construction activity.

The overall economy grew at a modest 1.1 per cent annual rate in the spring after an even weaker 0.8 per cent gain in the first quarter. But economists expect growth will rebound to close to 3 per cent in the current July-September quarter, helped by stronger construction activity.