Construction Outlays Post 3rd Monthly Decline

The Census Bureau’s construction spending data for June show a dropoff from the previous month and a slight year-over-year increase. (Photo: Skidmore, Owings & Merrill LLP)

WASHINGTON, DC—In line with the moderating domestic growth suggested by Friday’s disappointing report on second-quarter GDP, construction spending declined 0.6% in June from the previous month, the Census Bureau said Monday. It was the third consecutive monthly decline in the seasonally adjusted annual rate. The construction spending report coincided with the Institute of Supply Management’s announcement that manufacturing grew at a slower pace in July than it had in June. At a seasonally adjusted annual rate of $1.133 trillion, the June construction tally came in below a consensus estimate for 0.5% growth, Reuters reported Monday. However, it represented a year-over-year increase of 0.3%. A 1.3% monthly decline in nonresidential building, led by a 4.5% drop in factory construction, drove the June results. Within the residential sector, single-family homes posted a smaller monthly decline than multifamily. Both segments, though, are up from the year prior—by 16.4% in the case of apartments. Also up by double digits on a year-over-year basis, at least in the private sector, are hotel construction, 17.4% higher than a year ago, and office, up 19.6% from the year-ago period. However, in the public sector, office construction slid 4.2% from June of 2015. Taking a longer view, Ken Simonson, chief economist with the Associated General Contractors of America, says the drop in construction spending over the past three months is “probably more a reflection of the very strong gains posted early in the year than of cooling demand for construction. Nearly every major segment had first-half gains of more than 5% compared with a year ago. Contractors, surveys and the media all continue to report plenty of projects are starting or will soon.” At 52.6, ISM’s index for July pointed to slower growth compared to the 12-month high of 53.2 reached in June. Economists polled by Bloomberg had forecast a median index of 53. Nonetheless, ISM noted that July represented the fifth consecutive month for manufacturing growth, as 12 of the 18 industries represented in the index reported an increase in orders and nine of the 18 industries reported an increase in production. A reading above 50 indicates growth. Steady gains in the US economy have resulted in net positives for the multifamily sector—will this wave continue for the foreseeable future? What’s driving development and capital flows? Join us at RealShare Apartments on October 19 & 20 for impactful information from the leaders in the National multifamily space. Learn more.