Construction Activity Declined In August

Construction activity unexpectedly reversed course in the wrong direction in August. Construction spending declined 0.8 percent August after a 1.2 percent rebound in July. Market expectations were for a 0.5 percent gain. August's decrease was led by the private nonresidential sector-down 1.4 percent, following a 1.3 percent increase in July. Public spending fell 0.9 percent in August after jumping 2.1 percent the prior month. Private residential outlays eased 0.1 percent, following a 0.4 percent boost in July.

Looking at detail, the private residential component was actually favorable. Weakness was in residential excluding new homes, which are largely improvements. This subcomponent fell 2.0 percent after edging up 0.2 percent in July. On the plus side, new one-family outlays advanced 0.7 percent in August, following a 0.8 percent increase the prior month. New multifamily outlays rebounded 1.4 percent after a 0.5 percent dip in July. New private residential outlays were moderately healthy on average over the last two months.

On a year-ago basis, total outlays were up 5.0 percent in August, compared to 6.9 percent in July.

Again, the construction outlays data have been volatile recently on a monthly basis. But there is a mild upward trend although it is not as strong as earlier this year.

Construction spending saw a broad-based gain in July. Construction spending rebounded 1.8 percent after a 0.9 percent dip in June. While all broad categories advanced, July's increase was led by the public sector-up 3.0 percent, following a 1.8 percent decrease in June. Private nonresidential spending rebounded 2.1 percent in July after slipping 0.8 percent the month before. Private residential outlays gained 0.7 percent, following a 0.4 percent dip in June.