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Construction Spending Drops in August10-12-16 | News

Construction Spending Drops in August
Declines For Second Straight Month

Total construction spending fell 0.7 percent in August, marking the second straight monthly decline.

Total construction spending in August declined for the second straight month and is now at its lowest level in eight months, Construction Dive reports.

Census Bureau data shows that total spending, which combines both the private and public sectors, went down 0.7 percent compared to July in a broad-based drop. Total spending is also down 0.3 percent year-over-year.

"The drop came as a surprise, as experts had predicted the figure would rebound in the coming months amid an environment of low interest rates and a strengthening economy," Construction Dive said.

Month-over-month: total private construction fell 0.3 percent; residential spending also dropped 0.3 percent; nonresidential building shed 0.4 percent, according to Census Bureau data. However, the Associated Builders and Contractors said nonresidential construction in August was 1.1 percent lower than July.

Public construction declined 2.0 percent, driven downward mostly by the education (–0.4 percent) and highway (–2.9 percent) segments. Transportation was –6.3 percent, public safety was –4.5 percent, and commercial was –1.5 percent.

"Four of the five largest nonresidential subsectors "?u power, highway and street, commercial and manufacturing "?u combined to fall 2.2 percent on a monthly basis," said Anirban Basu, chief economist for the Associated Builders and Contractors.

"Stakeholders in the nation's nonresidential construction industry have become accustomed to seeing weak spending data," Basu said. "However, today's report represents a bit of a departure from previous reports. While previous weak spending reports can almost completely be explained by diminished public construction spending, today's report also revealed emerging weakness in private spending."

Some segments were noteworthy exceptions, however.

"Office-related construction spending continued to surge higher, rising 2 percent for the month and up a whopping 24 percent on a year-over-year basis," Basu said. "Construction spending related to lodging rose 1.2 percent on a monthly basis, and is nearly 16 percent higher than the year-ago level."

Home Purchase Sentiment Index Drops in August
Fannie Mae's Home Purchase Sentiment Index (HPSI) dropped 1.5 points to 85.0 in August, giving back nearly half of the 3.3 points it garnered the previous month when the HPSI soared to an all-time high.

The HPSI is derived from Fannie Mae's monthly National Housing Survey. In the survey, 1,000 Americans are polled via live telephone interviews to assess their attitudes toward owning and renting a home, home and rental price changes, homeownership distress, the economy, household finances, and overall consumer confidence.

Four of the HPSI's six components fell in August. Most notably, the share of consumers who expect home prices to go up in the next 12 months declined six percentage points. Also, the component that asked consumers whether now is a good time to sell a home fell five percentage points.

Overall, however, the index has been trending upward, a positive sign for the industry over the long term. The HPSI is up 4.2 points since August 2015, Fannie Mae said.

"Consumers have a fairly optimistic 12-month outlook on housing at the end of the summer home-buying season, supported by increased job confidence and more favorable expectations regarding their personal financial situations compared with this time last year," said Doug Duncan, senior vice president and chief economist at Fannie Mae. "The return to a slight upward trend in the HPSI during the spring and summer is, thus far, in line with our forecast, which calls for 4 percent growth in home sales in 2016 to the best level since 2006, and continued improvement for 2017."