News Column

Construction Spending in June Fell 1.8 Percent in June

August 1, 2014

Martin Crutsinger, The Associated Press

Construction spending in the U.S. in June reached its lowest point in three years (AP)
Construction spending in the U.S. in June reached its lowest point in three years (AP)

WASHINGTON - 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 per cent in June on a seasonally adjusted basis after rising by a revised 0.8 per cent in May, the Commerce Department reported Friday. It was the biggest setback since a 2.8 per cent fall in January 2011.

The weakness was widespread with spending on housing down for a second straight month, falling 0.3 per cent, while non-residential building activity fell 1.6 per cent, the biggest decrease since January. Spending on government projects dropped 4 per cent, 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 per cent fall in spending on single-family construction which offset a 2.5 per cent rise in the smaller apartment sector. Even with the two months of declines, housing construction is still 7.4 per cent 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 per cent higher than a year ago.

The 4 per cent fall in government projects was the biggest one-month setback since government building tumbled by 6 per cent in March 2002. The June weakness reflected a 5.2 per cent decline in state and local government projects which offset a 10.4 per cent 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 per cent 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 per cent growth rate in the second quarter will be followed by solid growth of around 3 per cent in the overall economy in the second half of this year.

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Original headline: Construction spending falls 1.8 per cent in June, biggest decline in more than 3 years


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Source: © 2014 The Canadian Press. All rights reserved.


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