US construction spending rises 0.7 per cent in July; led by houses, factories and power plants

WASHINGTON – U.S. construction spending in July climbed to its highest level in more than seven years, boosted by an increase in the building of houses, factories and power plants.

The Commerce Department said Tuesday that construction spending rose 0.7 per cent to a seasonally adjusted annual rate of $1.08 trillion, the highest level since May 2008. The report also revised up the June increase in construction spending to 0.7 per cent from 0.1 per cent previously.

Ground breakings for houses, apartment complexes and commercial centres have helped to improve overall economic growth. The government said last week that the U.S. economy expanded at an annual rate of 3.7 per cent in the April-June quarter, after having edged up just 0.6 per cent in the first quarter.

“We expect housing activity will continue to strengthen, underpinning greater residential investment in the coming quarters,” said Gregory Daco, head of U.S. marcoeconomics at the forecasting firm Oxford Economics.

After Thursday’s construction spending report, analysts at the bank Barclays projected that the economy is on track to grow 2.6 per cent during the third quarter and that the second quarter growth rate would be revised up to 3.8 per cent.

Total construction spending has risen 13.7 per cent over the past 12 months.

In July, construction of single-family houses advanced 2.1 per cent. Factories rose 4.7 per cent, and power facilities increased 2.1 per cent.

Spending on government building projects slipped 1 per cent, although they have risen over the past year largely because of the construction and maintenance of highways and streets.

The gains from residential construction have laid a foundation for broader economic growth since the beginning of 2014, after the sector suffered severe setbacks during the Great Recession due to the bursting of the housing bubble. The economy entered its seventh year of recovery this summer.

Other reports point to the strength in residential construction.

Housing starts rose 0.2 per cent in July to a seasonally adjusted annual rate of 1.21 million homes, the government said last week. All of July’s gains came from construction of single-family houses, which climbed 12.8 per cent to the highest level since December 2007.