Construction spending declined in July
Summary
High rates suppressing construction
The elevated interest rate environment continues to exert pressure on construction. Total construction spending fell 0.1% in July, amounting to a 2.8% year-over-year decline.
Residential spending increased modestly during the month, largely on account of a slight upturn in single-family outlays. Since the spending data do not account for material and labor price changes, it is too soon to say that the recent downdraft in single-family activity has bottomed. Rather, weakening permit activity and low builder sentiment suggests single-family construction is still trending lower against a backdrop of stagnant new home sales and elevated inventories in key builder markets.
Meanwhile, nonresidential spending continues to fall, with July's monthly decline bringing outlays to 1.1% below the year-ago level. Although there are pockets of strength in the infrastructure, institutional and data center categories, commercial development remains under significant pressure from high financing costs.
Author
Wells Fargo Research Team
Wells Fargo
