US Construction Spending: June 2020

Construction spending in the US decreased -0.7% from the previous month to a seasonally adjusted annual rate of US$1.355 trillion in June of 2020, following a downwardly revised -1.7% fall in May said the US Commerce Dept Monday.

Spending on private construction projects slipped -0.7%. Spending on residential projects fell -1.5%, offsetting a +0.2% gain in outlays on nonresidential construction projects such as manufacturing and power plants.

It was the fourth consecutive month of fall in construction spending. Spending on private construction dropped also -0.7% led by falls in:

  • residential (-1.5%),
  • commercial (-1.3%),
  • communication (-1.2%),
  • transportation (-0.6%) and,
  • amusement and recreation (-6.2%).
  • Also, public outlays fell -0.7% mainly due to nonresidential (-0.8%).

Since framing lumber typically accounts for around one-fifth of a home’s materials cost, builders must inevitably raise prices or watch their margins vanish. If lumber costs remain elevated, builders will have difficulty constructing homes that appeal to the lower and middle segments of the housing market where most of the demand is concentrated.

Although residential construction spending is down just -0.4% annually, the figure pales in comparison to the recovery in the demand-side of the housing market.