Construction Spending in US Soars to Highest in 7 Years

Published Date : Sep 02, 2015

Construction spending in the United States in the month of July jumped to a level that is the highest in over seven years, indicating that the business investment and the housing market can aid in underpinning economic development even amid turmoil beyond American boundaries. 

The total construction spending rose by 0.7 per cent compared to the previous month to reach a seasonally adapted annual rate of US$ 1.083 trillion to mark the highest level since 2008 in May, according to the Commerce Department.

The sector was dominated by private building and nonresidential as well as residential construction scaled new highs in the post recession period. Local and state government spending declined in the month of July, but only after they both posted impressive gains in the four previous months. 

Chief economist at Pantheon Macroeconomics Ian Shepherdson said in a note to clients that the overall feel gained from the last few months is that the in the national economy, the construction industry forms the strongest segment. Spending in this sector is on the rise at an impressive annualized rate of 26 per cent over the three month period leading to July. 

To be certain, data on construction spending is not only heavily revised but also rather volatile. On the other hand, low oil prices might prove to be a challenge for investment in structures that are otherwise used to extract underground natural resources. The overall construction trend, however, has been building over the duration of a year and the most recent developments have proved to be mostly positive for the growth in the second quarter. During the first seven months of 2015, actual construction spending rose 9.3 per cent from the same period the year before. 

The most recent construction data is in sharp contrast with manufacturing numbers for the month of August, which indicated that the sector is expanding albeit at a slower rate.