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July Construction Spending Offers Some Optimism, Some Stagnation

Posted September 03, 2020 by Bill Walker

Last week, we shared some positive news about residential construction in the U.S. For July, sales of new single-family houses topped 901,000, 13.9 percent above the revised June 2020 rate of 791,000. July’s numbers were also an impressive 36.3 percent above the July 2019 rate of 661,000 units sold. 

This week, the Census Bureau released data on total construction spending for July, and the news is somewhat mixed, though residential construction remains a high point.

Modest gains…and losses

Total seasonally adjusted construction spending (which includes residential and nonresidential construction) rose a meager 0.1 percent from June to July, from $1,362.8 billion in June to $1,364.6 billion in July — an increase of $1.8 billion. But when you compare 2020 to 2019, the figures are also nearly flat. Year-over-year, July’s total is just 0.1 percent below July 2019 ($1,366.0 billion).

While you might expect the pandemic to have exacted a heavy toll on construction spending, the numbers tell a different story on the whole. During the first seven months of 2020, which encompass the throes of the pandemic’s shutdowns, construction spending totaled to $792.6 billion, which is actually 4.0 percent above the same period in 2019 ($761.9 billion).

Private vs. public funding for construction

Breaking the July numbers out by privately versus publicly funded construction spending also reveals a varied story.

Private construction

Spending on private construction was up slightly from June, reaching a seasonally adjusted annual rate of $1,013.5 billion in July, which is 0.6 percent above June ($1,007.2 billion).

Residential construction was one of the shining stars among July’s private construction numbers. It reached a seasonally adjusted annual rate of $546.6 billion, which is 2.1 percent above the June totals and 0.5 percent higher than July 2019. Spending on multifamily home construction was particularly encouraging, increasing 4.9 percent from June to July and increasing 6 percent from July 2019.

Nonresidential construction, on the other hand, was down slightly from June to July, at a seasonally adjusted annual rate of $466.9 billion, 1.0 percent below June ($471.6 billion). The biggest decreases in private nonresidential versus year ago were in:

  • Religious organizations: Down 5 percent from June and down 26.4 percent from July 2019
  • Educational: Down 0.6 percent from June and down 23.7 percent from July 2019
  • Amusement and recreation: Down 2.3 percent from June and down 14.5 percent from July 2019
  • Lodging: Down 2 percent from June and down 12.9 percent from July 2019
  • Manufacturing: Down 0.2 percent from June and down 9.9 percent from July 2019
>> Related: Shiny and New: New Home Sales Continue Upward Trajectory

Public construction

Publicly funded construction spending in July was at a seasonally adjusted annual rate of $351.1 billion, a drop of 1.3 percent below June ($355.6 billion). Educational construction was at a seasonally adjusted annual rate of $82.2 billion, a 3.0 percent decrease from June’s $84.7 billion. Highway construction was also down 3.1 percent to $99.0 billion, as compared to $102.1 billion in June.

But the news isn’t all gloom; July’s numbers actually represent a 5.1 percent increase over July of 2019 ($334.2 billion). For example, public spending on construction of residential buildings is again a bright spot in the July report. Those figures rose 1.9 percent from June to July, reaching $ 8.854 billion and an impressive 41 percent compared to July of 2019 ($6.279 billion).

Other winners versus year ago on the public construction side include:

  • Water supply: Down 0.1 percent from June but up 17.6 percent from July 2019
  • Power: Up 3.6 percent from June and up 8 percent from July 2019
  • Public safety: Up 2.9 percent from June and up 57.2 percent from July 2019

Learn more

You can find out more about how these and other industries have been impacted by COVID-19 by visiting our free COVID-19 webpage.

 

Photo credit: DANIST on Unsplash

Tags: industry knowledge, COVID-19, construction

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