Construction Spending Unchanged In July

Oversized revisions have marred the construction spending report all year and put into question the reliability of its results. Spending was unchanged in July but June is now revised to plus 0.9 percent from an initial decline of 0.6 percent.

To be fair, construction spending on new homes, down slightly in the month and up only 1.7 percent year-on-year, is in line with housing starts where July's year-on-year growth, in a previously released report that measures units, is 1.3 percent. Multi-family units have been the strength of the housing sector, down a monthly 0.6 percent in this report but still up 19.8 percent on the year.

Non-housing data are mixed with private nonresidential spending, led by gains in the office component, strongly higher for a second straight month and up 30 percent year-on-year. But this is offset by declines on the public side including educational building which fell sharply in the month and is down 7.3 percent on the year.

This report is very hard to assess. Back in November last year, the Census Bureau, citing a calculation error, revised 10 years of data lower. And the results since raise the question of further errors.

Recent History Of This Indicator:
Construction spending is expected to bounce back in June, up a consensus 0.6 percent following steep declines in the two prior months of minus 0.8 percent and minus 2.0 percent. Construction spending on non-housing has been soft but spending on housing has been steadily climbing. Recent strength in housing starts is a positive indication for this report.