IBJNews

Construction spending suffers worst drop in 3 years

Back to TopCommentsE-mailPrintBookmark and Share

U.S. construction spending fell in June by the largest amount in more than three years as housing, non-residential construction and government spending all weakened.

Construction spending dropped 1.8 percent in June on a seasonally adjusted basis after rising by a revised 0.8 percent in May, the Commerce Department reported Friday. It was the biggest setback since a 2.8-percent fall in January 2011.

The weakness was widespread with spending on housing down for a second straight month, falling 0.3 percent, while non-residential building activity fell 1.6 percent, the biggest decrease since January. Spending on government projects dropped 4 percent, the biggest decline in more than a decade.

The June performance represented a setback to hopes stronger construction activity will help support overall economic growth.

The decline in housing reflected a 1.4-percent fall in spending on single-family construction which offset a 2.5-percent rise in the smaller apartment sector. Even with the two months of declines, housing construction is still 7.4 percent above the level of a year ago.

The drop in non-residential activity reflected weakness in hotel construction and the category that includes shopping malls. Non-residential building is 11.2 percent higher than a year ago.

The 4-percent fall in government projects was the biggest one-month setback since government building tumbled by 6 percent in March 2002. The June weakness reflected a 5.2-percent decline in state and local government projects which offset a 10.4-percent rise in spending on federal building projects.

Government building activity has been constrained in recent years by the fall in tax revenue as a result of the Great Recession and efforts at the federal level to get soaring budget deficits under control.

A slump in construction in the winter contributed to the economy shrinking at an annual rate of 2.1 percent in the January-March quarter, the biggest decline since the first quarter of 2009 during the depths of the Great Recession.

Economists say a rebound to a 4-percent growth rate in the second quarter will be followed by solid growth of around 3 percent in the overall economy in the second half of this year.

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
thisissue1-092914.jpg 092914

Subscribe to IBJ
ADVERTISEMENT