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US construction spending at 7-year high

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September 3
9:03 AM 2015

The US construction sector recorded an encouraging spending of $1.08 trillion, a 0.7 percent monthly growth, indicating a seven-year high. The July data from the US Commerce Department has not only boosted the market sentiment but also gave an indication of robust economic activity in the third quarter.

The construction spending rose for the eighth consecutive month.

Private construction spending grew at 1.3 percent and this boosted the overall the growth in the construction spending. 

The construction spending of $1.08trillion was highest since May 2008 while growth for June month also surpassed the previous forecast. The construction spending grew 0.7 percent as against the previously projected growth of 0.1 percent. 

Economists in a Reuters poll forecast that construction outlay would grow at 0.6 percent in July. Surpassing all these analysts' forecasts, construction spending rose 0.7 percent in July on a month-on-month basis and 13.7 percent when compared with previous July in 2014. 

Economic growth was fuelled by the Construction works on new houses, residential apartments, and commercial complexes. US economy recorded a growth rate of 3.7 percent during April-June quarter. This was a significant improvement considering the mere growth of 0.6 percent in the first quarter. 

Analysts are confident on further sustainable growth in the construction sector. The housing activity will further grow as the residential investment is increasing. 

Barclays forecasts that US economy is expected to grow at 2.6 percent during the third quarter and growth rate in the second quarter would be revised upwards to 3.8 percent. 

Single-family house construction activity grew 2.1 percent, factories up 34.7 percent and power sector 2.1 percent. However, the government spending on building projects dropped by one percent. The construction and maintenance of new highways, roads, and streets kept the government spending it tact. 

The demand for housing has been positive. The improvement in labor market and low mortgage rates are enabling the housing sector to continuously grow further. 

On the other hand, small companies are still finding it difficult to raise loans for construction activity. The continuous fall in global oil prices is also either delayed or halted several construction projects in the oil and energy sector. 

The construction spending was recorded at $one trillion with a growth rate of 2.2 percent during April. This was highest since November 2008 and this was highest percentage growth since May 2012, according to US Commerce Department

A quarter ago, the situation was totally different as business spending plans, employment and housing were contributing the most to the economy growth while consumer spending and industrial output were soft.

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