Construction Spending Falls to 1-Year Low, Says Commerce Dept.

Construction spending fell to a one-year low in June, tumbling 0.6 percent with drops in both the private and public sector, the U.S. Commerce Department reported Monday.

According to MarketWatch, economists who were polled by Econoday had actually predicted a 0.6 percent increase in spending. Reuters stated that economists it polled had expected to see a 0.5 percent increase in spending.

June was the third consecutive month in which construction spending fell, possibly indicating the need for a downward revision to the second-quarter economic growth estimate announced last week.

"The government reported on Friday that gross domestic product increased at a 1.2 percent annual rate in the second quarter after rising at a 0.8 percent pace in the January-March period," wrote Reuters. "Weak spending on home building and nonresidential structures, including gas and oil well drilling, contributed to anemic growth in the last quarter."

The EconoTimes reported that private residential construction dropped 0.6 percent in June while there was a 0.6 percent decline in public spending.

"The three-month annualized rate for private non-residential construction has dropped and implies that there is a downward shift. Moreover, the trend in private single-family is soft too," The EconoTimes continued.

Michelle Meyer, head of U.S. economics at Bank of America Corp. in New York, predicted the downturn last month because of the weather in comments to Bloomberg.

"The winter months allowed for stronger construction spending," Meyer told Bloomberg. "If you have a certain amount of construction that you need to do to satisfy demand, and you did more of that in the winter months than you otherwise would have, it means you have less to contribute in the spring."

Likewise, Ted Wieseman, an economist at Morgan Stanley, wrote in a note to his clients on July 19 that he sees residential investment falling 6 percent in the second quarter, reflecting "payback from weather-boosted [first quarter] construction activity."

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