US construction spending rises strongly in July on single-family housing

US CONSTRUCTION spending increased solidly in July as a shortage of houses on the market boosted outlays on single-family housing projects.

The Commerce Department said on Friday (Sep 1) that construction spending rose 0.7 per cent. Data for June was revised slightly higher to show construction spending increasing 0.6 per cent instead of 0.5 per cent as previously reported. Economists polled by Reuters had forecast construction spending increasing 0.5 per cent.

Construction spending increased 5.5 per cent on a year-on-year basis in July. Spending on private construction projects rose 1.0 per cent, with investment in residential construction advancing 1.4 per cent after increasing 1.5 per cent in the prior month. Private construction spending rose 0.6 per cent in June.

Spending on single-family housing projects surged 2.8 per cent in July. An acute shortage of homes available for sale is driving construction, though higher mortgage rates could stifle activity.

The rate on popular 30-year fixed mortgage is above 7.0 per cent, according to data from mortgage finance agency Freddie Mac.

The construction spending report showed outlays on multifamily housing projects gained 0.2 per cent in July. There is limited room for further gains as the stock of multifamily housing under construction is at a record high.

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Spending on private non-residential structures like factories rose 0.5 per cent in July. Spending on manufacturing construction projects accelerated 1.1 per cent. Efforts by President Joe Biden’s administration to bring semiconductor manufacturing back to the United States are boosting factory construction.

Spending on public construction projects fell 0.4 per cent after gaining 0.6 per cent in June. State and local government spending dipped 0.1 per cent while outlays on federal government projects dropped 3.6 per cent. REUTERS