Construction spending dips in July

Summary

Total Spending Dragged Down by the Residential Sector

• Total construction spending declined 0.4% during July, the second straight monthly drop.
• Upward revisions to overall spending in June takes some sting out of July's larger than expected drop. Total spending fell 0.5% in June, slightly better than the 1.1% decline published in the first estimate.
• Residential spending fell 1.5% during the month, with single-family (-4.0%) and multifamily (-0.6%) outlays declining in July. Home improvement spending rose 1.5%. Total residential spending is still up 14.0% over the year, however the drop-off in home buying brought on by higher mortgage rates is weighing heavily on the residential sector.
• Overall nonresidential spending advanced 0.8%, the second consecutive monthly gain. Private nonresidential improved 0.4%, while public nonresidential increased 1.5%.
• Most major total nonresidential subcategories rose during July, notably commercial (0.7%), office (0.5%) educational (0.1%), power (0.1%) and manufacturing (0.6%).
• Healthcare (-1.3%), water supply (-0.5%) and sewage & waste disposal (-0.3%) registered monthly declines.
• Public works expenditures rose 1.5% in July, with both the residential (0.8%) and nonresidential (1.5%) subcategories advancing during the month.
• Rising building material and labor costs have likely boosted overall spending, which is not adjusted for price changes. The Producer Price Index for inputs into construction rose 12.6% year-over-year in July.
• The Architecture Billings Index slipped to 51.0 in July from 53.2 in June. While still in expansion territory, the index has dropped for four straight months and now sits at the lowest point since January.

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